Ed Kashmarek - The Everyday Economist
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Housing Market Index Crosses Threshold in June

6/17/2013

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The National Association of Home Builders/Wells Fargo Housing Market Index rose to 52 in June, crossing the demarcation line between a good market and a poor market for the first time since April 2006, suggesting builders expect the housing rebound to continue. All three subcomponents also saw increases, with current sales conditions rising 8 points to 56, prospective buyer traffic rising 7 points to 40, and future sales expectations jumping 9 points to 61, the highest level since March 2006. The overall index has nearly doubled from a year ago, when it stood at just 29, as the housing market has improved noticeably.

The Federal Reserve's quantitative easing program has kept mortgage rates near record lows, although they have begun to creep up lately, helping to propel the housing recovery, which has become a bright spot in an otherwise weak economy. The big question on everyone's mind is how long will this rebound last? There are still plenty of would-be sellers that are holding out for higher prices that cannot currently sell due to being underwater on their mortgage. If and when prices rise enough, more supply will come on the market, helping to limit further price increases. In addition, while rising mortgage rates may get some people off the fence to go buy a home, that spurt will likely be short lived, until a point is reached when higher prices and mortgage rates start to price some buyers out of the market. Thus, while times are good right now in housing, the industry faces headwinds of rising mortgage rates and more supply coming on the market if and when more homeowners are able to sell.
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