Plenty of Americans want to buy a house this spring, and more families and single people acquired a previously owned home in April than the month before despite rising prices and a shortage of houses for sale.
Rising demand is not just good news for lenders and real estate agents. Everyone who sells to homeowners, up to and including boatbuilders and dealers, can cheer the trend, although the price and inventory problems cloud the horizon.
"The temporary relief from mortgage rates currently near three-year lows has helped preserve housing affordability this spring, but there's growing concern a number of buyers will be unable to find homes at affordable prices if wages don't rise and price growth doesn't slow," Lawrence Yun, chief economist for the National Association of Realtors, said Friday as the NAR reported that home resales rose 1.7 percent in April.
The realtor group said the seasonally adjusted annual sales rate was 5.45 million, up from 5.36 million in March — a figure that itself was revised upward.
The median existing-home price for all types of housing in April was $232,500, up 6.3 percent from the same month a year earlier. The NAR said April's price increase marked the 50th consecutive month of year-over-year gains.
Resales rose 12.1 percent in the Midwest, but that is where homes remain most affordable. The median price in the Midwest was $184,200, about $18,000 lower than the next-best region for affordability — the South.
Recent economic reports suggest that American consumers are feeling good about themselves and are eager to improve the quality of their lives. Retail sales had their best gain in more than a year in April, and consumer confidence surged in the University of Michigan’s preliminary Consumer Sentiment Index for May.
This week we will learn more about the health of the housing market and the mood consumers are in. The Commerce Department will issue its April report on new-home sales today. Economists’ median forecast is that they rose to a seasonally adjusted annual rate of 524,000 from 511,000 in March.
On Thursday we will see the Commerce Department’s data on durable goods orders for April. The consensus forecast is that orders for such things as cars and home appliances that are expected to last for several years rose 0.3 percent after an 0.8 percent gain the previous month. A report by economist and analyst Tim Clayton at EconomicCalendar.com said only one of the past eight monthly durable-goods reports has beaten expectations.
On Friday we will get the final consumer sentiment reading for the month from the University of Michigan. The expectation is that it will remain near its early-May reading of 95.8, the highest level since last June.
Also on Friday the Commerce Department will issue its revised report on first-quarter gross domestic product. The forecast is for a small bump up to 0.9 percent from the previous weak reading of 0.5 percent.
The second quarter may be well worth economy watchers’ attention this year, given what we have seen so far. The Federal Reserve is watching, too, of course, and its rate-setting Federal Open Market Committee saw inflation rise in April at the fastest rate in more than three years.
The Consumer Price Index rose 0.4 percent for the month as the price of gasoline climbed. Overall, though, inflation is still mild. The CPI has risen just 1.1 percent during the past 12 months.
Market Watch said the Fed wants inflation to rise to 2 percent, a rate it considers healthier for the economy. The central bank has been reluctant to raise interest rates despite steady economic growth and a tightening labor market because inflation has remained low.
Concern that a rate increase could come in June weighed on the stock market late last week, but two of the three major indexes closed higher for the full week. The Dow Jones industrial average fell 0.2 percent for the week, marking its fourth losing week in a row, but the S&P 500 index finished 0.3 percent higher and the Nasdaq composite index had a 1.1 percent gain.
Always alert for clues about the future of economic policy, stock investors and other Fed watchers pay close attention whenever a voting member of the Fed’s rate-setting Federal Open Market Committee speaks.
On Monday, Reuters reported that St. Louis Federal Reserve president James Bullard said in Beijing that U.S. labor markets “are at or beyond full employment,” one of the developments the Fed is tracking as it sets U.S. rate policy.
"Labor markets are relatively tight,” he added. “This may put upward pressure on inflation going forward. This is an important factor supporting the FOMC view on the expected path of the policy rate."
Bullard said the FOMC has laid out a data-dependent "slow normalization" of rates. The nominal policy rate would gradually rise during the next several years if the economy evolves as expected.
The prospects for a rate increase in June were believed to have risen last week after minutes from the central bank's April policy meeting were released. They showed that Fed officials believe the U.S. economy could be ready for a rate hike.
When the Fed weighs an increase, it not only considers the job market, but also the performance of the overall economy and evidence that inflation is rising beyond the central bank’s comfort zone.
On Friday, we will hear from Fed chairman Janet Yellen, who will take part in a panel discussion at Harvard University’s Radcliffe Day, but the event seems unlikely to produce significant news about the outlook for rates.
“This should be a generally academic and theoretical discussion which does not spill over into the immediate outlook for the economy and monetary policy,” Clayton said in his Economic Calendar report.
“Markets will, however, be watching the event very closely just in case there are comments on monetary policy which would potentially cause a very big market reaction.”