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article imageA surge in the U.S. housing market brings economic hope

By Nicole Weddington     Feb 27, 2014 in Business
With a nation eagerly waiting for any indication of an upturn in the economy, critics are hailing a recent upsurge in home sales as a promising sign of hope.
New home sales for the month of January exhibited a strong and steady pace, casting optimistic numbers for this spring and hopes that the news will lift the overall economy.
New home sales catapulted to one the fastest rates in over five years, following what was seen as a winter slump brought on by higher mortgage rates and inclement weather conditions. A report published by the Commerce Department noting this upsurge resulted in stronger stock prices, with emphasis on shares for homebuilders.
With this one-month upturn, economists are predicting a bright 2014 in terms of home sales, due in part to a slowly improving economy and continuing job growth. New-home sales rose 9.6 percent in January, the fastest rate since July 2008.
This growth in home sales seems to be a clear indicator of better days to come for home buyers across the US, even in Tampa, Florida, where companies like Tampa Exteriors would be doing brisk business.
“The economy is adding jobs and incomes are growing, making households more confident,” says Stuart Hoffman, Chief Economist at PNC Financial Services Group.
A surprise to economists, the surge in sales was the exact opposite of what many predicted as we entered the new year. Most experts based predictions of falling sales seen in both November and December, sending signals that the housing market was losing steam.
While the housing market is still a far cry from what it was during the boom of the past, analysts clearly see the steady recovery that has slowly evolved over the past two years. This latest surge may be a reaction to years of waiting for a better economy or just waiting for the right time to buy.
Buyers who have postponed long enough are executing purchases, overlooking plans to wait, and taking advantage of the great rates.
With a double-digit growth rate in residential construction, economic growth has increased by one-third of a percentage point. New home sales are expected to hit 500,000 this year, topping sales of 428,000 in 2013, a year when sales rose 16.3 percent to a new record in five years.
This unexpected and uplifting news, which was released Wednesday, prompted positive vibes on Wall Street, launching the Standard & Poor’s index into record-setting numbers and pushing stock prices upwards for several home builders. Shares of both Lennar and Pulte Group experienced increases by 3 percent.
Shares for businesses that supplement the housing industry experienced similar increases, as home sales spur purchases in home improvements. Lowe’s shares jumped nearly 5 percent with a net income increase of 6 percent, partly due to increases in new home sales.
Economists predict further gains in sales throughout the course of the year, citing a strengthened economy secured by job growth and help from federal spending cuts and easing tax rates.
The forecast for home prices in 2014 states slower increases over last year, which will help buyers ready to hit the ground running. This will be bolstered by a slow increase in mortgage rates, which have helped many get into homes that previously were beyond budget.
Last week, the average 30-year mortgage rate hit 4.33 percent, rising from 4.28 percent of two weeks ago. Between May and September of last year, rates surged about 1.25 percent, hitting its high point of 4.6 percent, and then slowly easing down.
Numbers like these are casting a positive light for homebuyers, homebuilders, and the economy as a whole. Whether it's the economy that is the cause or the surge in home sales, both are feeding each other to help move the nation in the right direction.
More about Housing, Housing market, us housing market, US economy, Economy
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