Published — Tuesday 29 January 2013
Last update 30 January 2013 12:18 am
NEW YORK: US home prices rose in November to rack up their best yearly gain since the housing crisis began, a further sign that the sector is on the mend.
But data on consumer confidence yesterday was less encouraging, with moods falling to their lowest level in more than a year as Americans became more pessimistic about the economic outlook and their financial prospects in the wake of higher taxes for many.
The S&P/Case Shiller composite index of 20 metropolitan areas gained 0.6 percent in November on a seasonally adjusted basis, in line with economists' forecasts.
Prices in the 20 cities rose 5.5 percent year over year, making for the strongest yearly price increase since August 2006 when prices were on their way down.
The housing market became a bright spot for the economy last year as prices rose and inventory tightened. The sector is expected to contribute to economic growth in 2013.
"What we're seeing is really a gradual improvement in the overall economy," said Anthony Chan, chief economist for Chase Private Client in New York.
Rising home prices and recent gains in the stock market should blunt the impact of tax increases for consumers and spending should improve by the second half of the year, said Chan.
Homebuyers also have been enticed by historically low interest rates. The Federal Reserve's latest stimulus efforts are helping to keep rates low, as the central bank buys assets including mortgage-backed securities.
It was the 10th month in a row that prices have increased, the longest string of gains since before 2006. Last year's rise in prices beat a nine-month consecutive run in 2009 and 2010, when the market was boosted by a homebuyer tax credit.
A number of challenges remain for the housing market, including tight access to mortgages and on-going foreclosures.
Highlighting the hurdles on the path to recovery, separate government data showed the homeownership rate slipped to 65.4 percent in the fourth quarter from 65.5 percent.
Consumer attitudes dropped more than expected to 58.6 in January, data from The Conference Board showed. It was the lowest level since November 2011.
At the start of the year, US politicians came to an agreement that averted the so-called fiscal cliff of spending cuts and tax increases that had been set to come into effect.
But the deal did raise taxes for many Americans, while a payroll tax holiday came to an end. Lawmakers still face a number of budget decisions.
"Consumers are probably pretty unhappy to notice that their payroll taxes have gone up," said David Sloan, economist at 4Cast Ltd. in New York.
US stocks pared slight gains immediately after the report was released, but Wall Street was modestly higher by midday.
The Conference Board's consumer expectations index tumbled to its lowest level since October 2011 at 59.5, while the present situation measure slipped to 57.3.
Consumers' views on the labor market were also weaker, with the "jobs hard to get" index rising for the first time since September.
Economists said the pain should be short lived and that confidence was likely to perk back up as long as Washington can come to an agreement on the budget issues yet to be resolved.
"This might bounce back pretty quickly as people get used to a smaller paycheck. Right now, it's a sticker shock," said Craig Dismuke, chief economic strategist at Vining Sparks in Memphis, Tennessee.
Home prices on a non-adjusted basis slipped 0.1 percent. The non-adjusted numbers showed prices fell in about half of the cities covered by the survey, with the winter months typically a weak period for housing, the survey said.
Phoenix, which saw its housing market rebound sharply last year, led with the biggest yearly gain at 22.8 percent. New York was the only city to fall, down 1.2 percent from the previous year.