Home prices accelerate by most in seven years
NEW YORK (Reuters) – 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 on Tuesday 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.
All 20 cities covered by the index saw yearly gains for the third month in a row.
The housing market turned a corner in 2012, several years after its far-reaching collapse. The recovery has picked up since as inventory tightened, foreclosures eased and historically low mortgage rates have attracted buyers.
“Low inventories and gradually improving housing demand have combined to push housing starts higher and support home price appreciation,” said Michael Gapen, an economist at Barclays in New York.
“We see these factors as remaining in place and expect residential investment to add to GDP growth in the coming quarters. We also expect rising real estate wealth to support household balance sheets and underpin consumption, helping the broader economy to offset a substantial fiscal drag in 2013.”
Prices in Phoenix continued their sharp ascent, rising 22.5 percent from a year earlier. Other standouts included San Francisco, up 22.2 percent, and hard-hit Las Vegas, up 20.6 percent.
For the first quarter of this year, the seasonally adjusted national index rose 3.9 percent, stronger than the 2.4 percent gain of the final quarter of last year.
Housing and the consumer have shown strength even as there have been hints tighter fiscal policy is starting to bite in the broader economy. Across-the-board government spending cuts of $85 billion went into effect in March, while the payroll tax holiday expired at the beginning of the year, raising taxes for many Americans.
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.
Separate data on Tuesday showed consumer confidence strengthened in May to the highest level in more than five years.
The Conference Board, an industry group, said its index of consumer attitudes jumped to 76.2 from an upwardly revised 69 in April, topping economists’ expectations for 71. It was the best level since February 2008.
April was originally reported as 68.1. After dropping in March, it was the second month in a row confidence has improved.
The expectations index rose to 82.4 from 74.3, while the present situation index climbed to 66.7 from 61.
Consumers’ assessment of the labor market improved. The “jobs hard to get” index slipped to 36.1 percent from 36.9 percent the month before, while the “jobs plentiful” index gained to 10.8 percent from 9.7 percent.
In a sign of confidence among high-end consumers, jeweler Tiffany & Co reported better-than-expected sales for the first quarter.
(Editing by Chizu Nomiyama)