The U.S. housing market went through a rough phase for a couple of months only to rebound in full swing and log a seven-year high new home sales data in February. In fact, the space hogged investors’ attention to start 2015 on sustained economic recovery, a healing job market, rising consumer confidence, moderating home prices and, of course, low interest rates prevailing in the U.S.
The optimism was so high in the housing space prior to the key spring selling season that even a frigid winter did not subdue the mood. New home sales surged 7.8% (seasonally adjusted) to a 539,000 annualized pace against economists’ expectation of a sequential drop to 460,000 in the month. But, sales surpassed January’s total.
The spike in the inventory along with a favorable job market and cheap energy bills probably led to this buoyancy. All these point to a staggering start to the busy spring selling season of homes. With the Freddie Mac 30-Year monthly average commitment rate falling to 3.71% in February 2015 from 4.30% in the year-ago level, purchasing houses became affordable. Plus, even after rising from the year-ago level, home prices are still below the pre-recession level.
Per Kiplinger, “across the U.S., home prices are still 23% lower, on average, than they were in 2006.†Not only this, Kiplinger expects home prices nationally to “rise by 3.5% in 2015, at the low end of the historical range of 3% to 5% annual appreciation (before inflation).†Kiplinger also expects existing-home sales to see an 8% jump in 2015 (which declined 2% in 2014) and new-home sales to skyrocket 25% this year (which saw just a 4% expansion in 2014).
What’s in Store for Spring?
The housing headlines draw investors’ attention from the first day of spring. The season warms up in March and sees maximum business till the back-to-school season in September (read: Two New Homebuilding ETFs from UBS Hits the Market).
The trend has not been too encouraging lately after data on Housing Starts and mortgage applications failed to match up to expectations. However, bad weather took the major share of the blame and the latest data show a ray of hope.
