Economy Watch: Home Price Rises Slowing Down; New Home Sales Spike in May; Consumers Feeling Better
- Jun 25, 2014
According to the latest S&P/Case-Shiller Home Price Indices, which were released on Tuesday by S&P Dow Jones Indices, the 10-city and 20-city composite indexes were up 10.8 percent year over year in April. That’s still an increase, but it’s lower than previously. In fact, 19 of the 20 cities saw lower annual gains in April than in March.
Month over month, Case-Shiller’s 10-city and 20-city composites increased 1 percent and 1.1 percent respectively in April. Seven cities–Cleveland, Las Vegas, Los Angeles, Miami, Phoenix, San Diego and San Francisco–experienced lower gains than in March. Boston prices were up the most, with an increase of 2.9 percent, its highest-ever month-over-month gain. At the bottom of the list, New York gained only 0.1 percent. Dallas and Denver continue to set new price peaks, while Detroit remains the only city below its January 2000 value.
“Although home prices rose in April, the annual gains weakened,” David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said in a statement. “Overall, prices are rising month to month, but at a slower rate.”
New Home Sales Spike in May
In other housing news, the Census Bureau and HUD reported on Tuesday that sales of new single-family houses in May 2014 came in at an annualized rate of 504,000 units. That’s a considerable month-over-month spike–18.6 percent above the revised April rate, and 16.9 percent above the May 2013 rate.
Historically speaking, however, new home sales are still quite low. A rate of about a half a million units a year is about how fast new homes sold in the late 1960s, when the population of U.S. homebuyers was a lot smaller than it is now. After about 1970, the rate rarely dipped that low, and by the 1990s it regularly broke 800,000 units a year and kept rising to a bubble peak of nearly 1.4 million units by the mid-2000s.
The supply of new houses is in the normal range. According to the bureau, the number of new houses for sale at the end of May was 189,000, which is a supply of 4.5 months at the current sales rate. The bureau considers a house for sale when a permit to build has been issued in permit-issuing places, or work has begun on the footings or foundation in nonpermit areas, but a sales contract hasn’t been signed nor a deposit accepted.
Consumers Feeling Better
The Conference Board reported on Tuesday that its Consumer Confidence Index, which had increased in May, improved again in June. The Index now stands at 85.2 (1985 = 100), up from 82.2 in May. The Present Situation Index increased to 85.1 from 80.3, while the Expectations Index rose from 83.5 in May to 85.2.
“Consumer confidence continues to advance and the index is now at its highest level since January 2008,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement. “June’s increase was driven primarily by improving current conditions. Expectations regarding the short-term outlook for the economy and jobs were moderately more favorable, while income expectations were a bit mixed. Still, the momentum going forward remains quite positive.”
Wall Street decided that a selloff would be just the thing on Tuesday, with the Dow Jones Industrial Average dropping 119.13 points, or 0.7 percent. The S&P 500 was off 0.6 percent and the Nasdaq fell 0.4 percent.