A single family home is shown for sale in Encinitas, California.
NEW YORK: US home prices accelerated by the most in nearly seven years in March while consumer confidence surged in May, suggesting there were areas of resilience for an economy that is facing the pinch of belt-tightening in Washington.
The S&P/Case Shiller composite index of 20 metropolitan areas climbed 10.9 percent year over year, beating expectations for 10.2 percent, the survey released yesterday showed. This was the biggest increase since April 2006, just before prices peaked in the summer of that year.
Prices in the 20 cities gained 1.1 percent in March compared to the month before on a seasonally adjusted basis, topping economists’ forecasts for a 1 percent rise.
The housing market turned a corner in 2012, several years after its far-reaching collapse. The recovery has picked up since as inventory has tightened, foreclosures eased and historically low mortgage rates have attracted buyers. Separate data showed consumer confidence picked up in May to its highest in more than five years.
Housing and the consumer have shown strength even as there have been hints that tighter fiscal policy is starting to bite in the broader economy. Across-the-board US government spending cuts of $85bn went into effect in March, while the payroll tax holiday expired at the beginning of the year, raising taxes for many Americans.
The data suggested both segments were performing better than the overall economy, said Sam Bullard, senior economist at Wells Fargo in Charlotte, North Carolina.
“There are some individual circumstances that are helping to propel both of these a little bit stronger than what the actual underlying strength would suggest,” said Bullard, pointing to the effect of higher stock prices on consumers, and investor demand for homes in beaten-down regions lifting prices.
Economists expect the pace of growth likely cooled in the second quarter, partly due to tighter fiscal policy, but the second half of the year is seen regaining momentum. Investor attention has turned to when the Federal Reserve might start to slow its economic stimulus efforts.
Reuters
