A lot of attention will be paid to the June S&P/Case-Shiller home price data on Tuesday, as economists watch to see whether the U.S. housing market has found its feet after a tough winter.
The unusually cold weather challenged the market earlier this year, as it did in Canada. The data since then have sent mixed messages about the market’s health, and economists have been trying to decipher how much of the slowness was purely weather-related.
May’s S&P/Case-Shiller home price numbers, which were released a month ago, came in well below expectations. Prices rose at their slowest annual pace since February, 2013, and they were down from the prior month on a seasonally adjusted basis.
But some of the recent data have been more positive, such as the latest numbers on existing home sales, which came out on Thursday and surprised on the upside. The number of existing homes that changed hands rose to 5.15 million units on an annualized basis in July.
“The improvement in the level of sales in July built upon three consecutive months of gains and was well above market expectations going into the report for sales to instead decline to 5.02 million annualized units,” Royal Bank of Canada economist Laura Cooper wrote in a research note. Resales are now at their highest level since September, 2013, she pointed out.
The numbers also showed that the median sales price rose 4.9 per cent from a year ago to $222,900 (U.S.), which Ms. Cooper noted was the first year-over-year price acceleration since January.
Bank of Nova Scotia economist Derek Holt said the details behind the numbers were even more encouraging. The market has now recovered from its swoon earlier this year, and resale volumes for the rest of this year and the start of 2015 could be the highest they’ve been since before the crisis, he said. He added that the degree of sales that are coming from first-time buyers “is a plus,” and distressed sales fell to 9 per cent of total sales, the lowest proportion since 2008.
The fact that home sales have risen since bottoming in March is “a clear sign that much of the recent soft patch was weather-related,” Bank of Montreal economist Robert Kavcic wrote in a research note Friday. “As an added support, 30-year mortgage rates have edged down roughly 45 basis points since the start of the year, and lending standards have eased somewhat.” (A basis point is 1/100th of a percentage point.)
Indeed, affordability is still very attractive by historical standards and the job market is improving, both factors that should lend support to a continued recovery in the U.S. housing market, he added.
Recent data on housing starts was also “encouraging,” Ms. Cooper noted, and home-builder confidence has been strengthening.