In February, 2013, Americans bought existing homes at the fastest pace in three years, as mortgage interest rates, remaining near record lows, continued to drive a housing market revival.
The median forecast of 77 economists surveyed by Bloomberg for existing-home sales called for an increase to a 5 million pace. This was supported by data from the National Association of Realtors, which showed that purchases increased 0.8 percent to a nearly five million annualized rate, the most since November 2009.
Higher housing demand, combined with limited supply, is driving increased property values, resulting in gains in household confidence and wealth, which in turn are helping increase consumer spending. The figures corroborate the Federal Reserve’s view that labor conditions are on the mend and residential real estate is picking up along with the broader economy.
Consumers’ views of the economic outlook brightened in March. “Americans are growing more confident about their own financial and economic situations,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “A quicker pace of employment growth, a modest wealth effect, and what looks to be a decline in gasoline prices has likely bolstered future expectations on the economy.”
“The fundamentals that usually drive housing activity, such as job growth and interest rates, those are favorable, and they suggest that we should continue to advance,” said Michael Moran, chief economist at Daiwa Capital Markets America Inc. in New York, who correctly forecast the February pace. Still, “the inventories are said to be tight in many markets, and that’s holding sales back to a degree.”
Gains in home prices added $1.4 trillion to household wealth in 2012, and further appreciation this year will boost net worth by as much as $1.7 trillion, according to forecasts by Lawrence Yun, the National Association of Realtors® chief economist. The increase will lift consumer spending by anywhere from $70 billion to $110 billion in 2013, he predicted.
Resales, tabulated when a contract closes, accounted for about 93 percent of the residential market in 2012, when a total of 4.66 million previously owned houses were sold. That was the most since 2007 and up 9.4 percent from 2011.
The strength in demand has bolstered sales of new properties as well. Lennar Corp., the third-largest U.S. homebuilder by revenue, said orders rose in their fiscal first quarter. “Current market conditions are driven by strong demand resulting from low interest rates and attractive home prices, which have led to very affordable monthly payments, compared to increasing rental rates,” Chief Executive Officer Stuart Miller said in a statement on March 20th of 2013. New orders, deliveries and backlog have “shown strong increases,” he said.
According to Zillow®, home values nationwide rose for the 16th straight month in February of 2013 to a Zillow Home Value Index of $158,100. In further support of the claims that the housing market is indeed recovering, the 30 largest metropolitan areas across the country covered by Zillow recorded both annual and monthly home value appreciation in February.
Below is a sampling from the Zillow Home Value Index for those 30 areas for the twelve months ending in February of 2013:
- New York City, Boston, Miami- Fort Lauderdale, and Atlanta increased by an average of 5.7%
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- Chicago, Pittsburgh, and Cleveland increased by an average of 2.6%
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- Dallas-Fort Worth and St. Louis increased by an average of 4.6%
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- Los Angeles, San Francisco, Las Vegas, and Phoenix increased by an average of 17.8%
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Bottom Line
It is extremely important for all people who are planning to buy a home in the near future to continue to keep in touch with your mortgage loan officer for advice and suggestions on how to be sure you stay on track for home ownership.
