During the past several years I’ve told my students and others
that one of the most important indicators of economic activity to watch is the housing
index – and that when this showed a rebound, the economy would be back on
track. Well, the S&P/Case-Shiller index of property values, which was
released yesterday, increased 12% percent from April 2012 to April 2013, the
biggest year-over-year gain since March 2006. The average home price climbed
more than forecast and showed further strength in the U.S. housing market.
The reason for the rise is simple: housing is in short
supply, we’ve had record-low mortgage rates, and there is an improving job
market. The question that remains is
whether or not the U.S. economic recovery is far enough along to overcome the recent surge in borrowing costs after Federal
Reserve officials said they may trim unprecedented accommodative monetary measures
meant to spur the economic expansion. I believe it is.
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| From Calculated Risk |
The graph shows the year-over-year change in the
Case-Shiller Composite 20 Index (a measure of sales activity in 20 major U.S. cities)
is up 12.1% compared to last April – marking the 11th consecutive month with a
year-over-year gain. That’s an amazing rise of essentially 1% per month. In
April alone, the index logged a 2.5% gain in home values compared with March,
the fastest gain in more than six years of tracking.
Not
all cities see equal gains. The biggest gainers over the past year have been those markets that were the hardest hit: Atlanta, Detroit, Las
Vegas, Los Angeles, Phoenix, and San Francisco all posted price gains between
19 and 24 percent.
The next chart shows the nominal seasonally adjusted Composite 10 and Composite 20
indices. The indexes are off about 25% from the peak and up about 13% form the post bubble low set in Jan 2012. While the increase does not look dramatic, it clearly marks that we've turned the corner regarding the housing market in the U.S.
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| From Calculated Risk |
