The Case-Shiller national house price index for April shows the third monthly rise and a gradual move back towards positive year-on-year territory (see chart below). It's been here before in this cycle, and then prices started to fall again. So maybe it'll do that again (cue dramatic music and the appearance of a villain from right stage labelled "fiscal cliff"). But the mortgage rate has fallen from 5.1 % then to 3.6% now. Housing starts are still sluggish, and recent strength is prolly weather-related, but their trend is still up --- slowly.
Housing matters because although it's only a couple of percent of GDP, it fluctuates massively over the cycle, adding in it's own right a further couple of percent to the upswing and taking it away in the downswing. But it also adds indirectly, because new houses often means new household appliances, new carpets, new curtains. And it also adds to confidence: most ppl's main asset is their home. If its price has stabilised or is rising, they feel more comfortable spending -- the so-called "wealth effect".
So if this rise in house prices is sustained, this will put strong underpinning underneath the recovery. Always assuming we remain villain free.
Oh joy, oh rapture unforeseen,
The clouded sky is now serene,
Well, we have yet to deal with the dual villains, Fiscal Cliff in the US and Batty Austerity in Europe. On verra.
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