subject: Investment Reports - Is Us Housing Market On The Rise? [print this page] Now wont you be surprised if we answer the headline question in Yes through this article, after all it is the housing market that we are talking about in conjunction with the word rise. As we write this piece, many housing markets around the country continue to hobble along, still wounded by the sustained economic malaise in the U.S. The sector has largely been a drag on the economy since the start of the financial crisis, but there are some bright spots to cheer up in an otherwise bleak outlook for the market going into the second half of this year. So heres a look at some of the important housing data that should help us derive an answer.
The first statistic that we considered for our analysis is the S&P/Case-Shiller Home Price Indices, which are the leading measures for the US residential housing market, tracking changes in the value of residential real estate both nationally as well as in 20 metropolitan regions. The Indices cover nearly half of US homes, are calculated monthly using a three-month moving average and published with a two-month lag. Note that we have chosen the seasonally adjusted price data for our analysis. According to their latest release in May this year, home prices have risen in 18 of the 20 tracked cities.This also marks the fourth straight month that prices have advanced in a majority of US cities. Among the cities Chicago, Atlanta, Las Vegas, Phoenix and San Francisco posted the biggest increases, however, Detroit and Charlotte were only two cities to record a decline. Further, 12 of these cities observed a price rise over the past 12 months, however, the overall it measured a fall of 0.6 per cent in home prices for all 20 cities over the 12 months ending in May. Though this suggests that weaker markets continue to weigh on national prices, but other significant measures have risen nationally over the past year.
The next important piece of statistic to consider would be the US Department of CommercesHousing Starts, which is number of new residential construction projects that have begun during any particular month. The annualized number of housing starts climbed to 780,000 in June to register a new three-year high, while building permits landed at 760,000. Greater interest from home buyers is spurring builders confidence that, by the way, has hit a 5-year peak in July. Consequently, the builder sought the highest number of permits to build homes and apartment in three and half years.
It also makes sense that demand is picking up since current economic conditions support housing purchases. Nevertheless, the supply of homes for sale remains extremely low, which has certainly helped in stabilizing prices. There were 145,000 new homes for sale in the month of May,which was only slightly higher than in April, the lowest supply on records dating back to 1963. Furthermore, the Fed's supporting monetary policy with interest rates at all-time lows has, according to a study by Mortgage Bankers Association (MBA), made owning a home less expensive than renting in some places. The study also states that the average 30-year fixed-rate mortgage recently dropped to 3.74%, the lowest MBA has ever recorded.
Federal Housing Finance Agency, which presides over mortgage giants Fannie Mae and Freddie Mac, said that prices have increased 3 per cent in the 12 months ending in April.Core Logic, a privately owned firm, also releases housing statistics and in a recent release calculated a price increase 1.1 per cent nationally in the 12 months ending in May.
The housing industry being a leading indicator of economic growth has certainly caused a lot of excitement in the markets. Quite recently on 2 August 2012, the International Monetary Fund said it believes a recovery in the US housing market is key to eventually boosting economic growth in the US and bringing down the countrys employment rate clearly suggesting its anticipation of recovery rally in housing market in near future.
Despite the modest gains in housing, the broader US economy has given mixed signals and even weakened in recent months. Therefore, it will be interesting to see how this particularly disappointing economic data would figure into the Feds plans for the monetary policy. It is quite likely that the Fed would want to keep rates at current levels for as long as possible, and they are perhaps justified in doing so as low interest are beginning to have an effect on the housing market.
So in light of all these facts and details, it would be safe to say - yes, the US housing market is on the rise as clearly indicated through several statistical data. The confidence build-up in the sector is extremely likely to continue its uptrend.
