U.S. Housing Prices Increased More Than Forecast in April
Home prices climbed more than forecast in the 12 months through April, rising by the most in more than seven years and showing further strength in the U.S. housing market.
The S&P/Case-Shiller index of property values increased 12.1 percent from April 2012, the biggest year-over-year gain since March 2006, after advancing 10.9 percent a month earlier, a report showed today in New York. The median forecast in a Bloomberg survey of 28 economists called for a 10.6 percent advance.
Short supply, record-low mortgage rates and an improving job market combined to boost housing demand and spark the rebound in prices. The recovery is probably far enough along to overcome the recent surge in borrowing costs after Federal Reserve policy makers said they may trim unprecedented accommodative measures meant to spur the expansion.
“Housing’s doing really well and I don’t think the backup in mortgage rates to date is going to derail it,” said Brian Jones, senior U.S. economist in New York at Societe Generale, who projected a 12.3 percent rise in home prices. “We’re still well off the highs, but price increases could continue for the next several years.”
Bloomberg survey estimates ranged from increases of 9.9 percent to 12.3 percent. The S&P/Case-Shiller index is based on a three- month average, which means the April data were influenced by transactions in February and March.
Home prices adjusted for seasonal variations increased 1.7 percent in April, compared with a 1.9 percent gain in March. The Bloomberg survey median called for a 1.2 percent rise. Unadjusted prices climbed 2.5 percent in April after a 1.4 percent gain as 19 of the 20 cities showed advances.
The year-over-year gauge, which includes records going back to 2001, provides a better indication of price trends, the group has said.
All of the 20 cities in the index showed an increase in year-over-year prices, led by gains of 23.9 percent in San Francisco and 22.3 percent in Las Vegas. The smallest gain was in New York, which showed a 3.2 percent advance.
“The recovery is definitely broad-based,” David Blitzer, chairman of the S&P index committee, said in a statement. “Recent economic data on home sales (ETSLTOTL) and inventories confirm the housing recovery’s strength.”
The price index results follow other signs that housing has strengthened in the second quarter even as the economy shows signs of slowing. Beginning construction of new homes climbed last month as permits to build single-family houses rose to the highest level since May 2008, the Commerce Department reported June 18.
Sales of previously owned U.S. homes climbed 4.2 percent in May to an annualized rate of 5.18 million, the highest level since November 2009, figures from the National Association of Realtors showed last week. The median selling price surged from a year ago by the most since October 2005, the group said.
Traction in the residential real estate recovery is supporting homebuilders’ positive outlook. The National Association of Home Builders/Wells Fargo index of builder sentiment rose eight points, the biggest monthly increase since September 2002, to 52 in June. Readings above 50 mean more respondents said conditions were good.
The sustained growth in demand is lifting companies such as lumber producer Weyerhaeuser Co. (WY) of Federal Way, Washington, and building confidence in the housing market’s return to pre-recession levels.
“We are, as we discussed in May, seeing a recovery in housing,” Chief Executive Officer Daniel Fulton said on a June 17 conference call. “We believe we are on our path to long-term recovery to trend levels.”
At the same time, borrowing costs are climbing from record lows. The average rate on a 30-year fixed mortgage was 3.93 percent in the week ended June 20, compared with an average 3.55 percent so far in 2013, according to data from Freddie Mac. The rate fell to 3.31 percent in November, the lowest in records dating to 1972.
Fed Chairman Ben S. Bernanke said at a news conference last week that the rise in mortgage rates hasn’t been “so dramatic” as he suggested the housing market may be strong enough to withstand higher borrowing costs.
At the same time, investors sold bonds that guide home-loan rates as Bernanke said he expects the Fed will slow its $85 billion in monthly asset purchases later this year and end the program around the middle of 2014.
To contact the editor responsible for this story: Christopher Wellisz at firstname.lastname@example.org