Friday, December 28, 2012

A Bright Star in a Cloudy Sky

Amid the dysfunction of the pending Fiscal Cliff disaster, we can take comfort in seeing the beginning of a housing rebound.  Finally.

As John Waggoner states in a piece, the housing market is by far the biggest economic stimulator out there.  With mortgage rates hovering just north of 3%, buyers have a great incentive to take a leap of confidence and buy.  Record-high rents, brought about by the understandable reluctance of consumers to buy into a falling market,  are another push as demand is far outweighing supply.

Of course, it's not just about signing up for a mortgage.  Even houses in pristine condition require some sprucing up, if only to reflect the buyer's individual taste in curtains, furniture and updated appliances.  Come spring, buyers need lawn and gardening tools, and winter demands, at the very least, a snow blower.  That is why Lowe's and Home Depot have seen share prices climb steadily since summer (although the Longshoreman's Strike, if it occurs, could cause prices to ease).

The Schiller Home Price Index, arguably the most often-watched housing indicator, and a significant data point reflecting  prices nationally as well as in 20 metropolitan cities, recently registered 4.30, a level not seen since June 2010.  While the southwest, particularly Phoenix and San Diego, enjoyed the highest rebound, New York and Chicago reflected lower annual prices, understandably, since those two markets did not fall nearly as far during the downturn. 

Steadily improving employment, if the figures are to be believed, should contribute to the rebound.
Now all we need do is hope that the Fiscal Cliff is nothing more than a bad dream, and that we will wake up on January 2 with the mortgage deduction still intact.  Fingers crossed.

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