US house prices grew in March at the fastest rate in almost seven years, as consumer confidence once again bred optimism that the economy is heading in the right direction. With the spring buying season having apparently surpassed most analyst expectations, the positive housing report is being interpreted as a much-needed buffer to counter the tightening of the purse-strings in the Capitol.
The S&P/Case Shiller composite index was up by 10.9% compared to the same time last year, surpassing the average estimation of 10.2%. Growth in March therefore has become the largest since the spring of 2006.
2012 became one of the most important years in the history of the US housing market, when signs of life once again began to emerge after several years of disaster following its collapse. Recovery started slowly, but has since increased pace as vacant inventory decreases, foreclosures are being proactively avoided by all parties and some of the lowest mortgage rates in the history of the US market are encouraging more buyers to sign on the dotted line.
What’s more, a recent poll carried out by Reuters indicated that analysts and economists for the most part believe that the momentum will carry on for the rest of the year at least. Data has also shown that confidence among consumers during the month of May was its highest since 2008.
Both the housing and consumer markets are displaying admirable and perhaps somewhat unexpected strength despite ongoing warnings of strict fiscal policies that could have a knock-on effect across much of the economy. The government’s $85 billion spending cut initiative kicked-off in March, while the end of the payroll tax holiday resulted in plenty of Americans facing larger tax bills.
The second quarter of the year is not expected to perform quite as well in terms of market growth rate, but the pace is once again predicted to step up as of the beginning of Q3 and on for the rest of the year. Investors are for the most part now focusing on exactly when the Fed may implement a slowdown of ongoing stimulus efforts for the economy.
Residential property values once again rocketed in Phoenix, having gained an impressive 22.5% since the same time last year. Among the other notable examples were properties in San Francisco which have increased in value by 22.2% in the past 12-months and homes in Las Vegas which are up 20.6%.
House prices in Los Angeles were also up by 16.6% year on year.
However, there are some in the industry insistent on warning that the pace at which property values are increasing in some regions is faster than the improvement of housing market essentials upon which the industry depends. As such, they argue that what goes up may well come down just as fast and could even breed a reversal of the current trend.