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The initial estimate of fourth quarter US GDP released recently has confirmed that the country is experiencing a slight economic slowdown. This should come as no surprise. We've seen the manufacturing sector continue to suffer from a strong dollar, while the energy sector has been hurt by the low price of oil. What's more surprising is that consumer spending, which has helped power US growth over the past few years, moderated in the fourth quarter.

So what, if anything, is working for the US economy? One area of continued strength is the housing sector. Recall that housing was the epicenter of the global financial crisis nearly a decade ago. It experienced a sluggish rebound for years but is well on the path to recovery at this point. It has been helped along by ultra-low interest rates, which have translated into historically low mortgage rates. This has, in turn, helped counter the more strict credit conditions that have persisted since the crisis and has helped result in a solid increase in home prices, of course with variations by region.


Home Prices Trend Upward

The November Federal Housing Finance Authority (FHFA) House Price Index, released last week, showed home prices are up 5.9% year-over-year. Similarly, the Case-Shiller Home Price Index rose an impressive 0.9% in November, on the heels of solid gains of 0.8% and 0.6% in the previous two months, respectively. Also, the Case-Shiller Index indicated significant breadth, with all 20...

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The Pending Home Sales Index increased for the third straight month to a level 11.1% above the same period a year ago.  The Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts reported by the National Association of Realtors (NAR), increased 1.1% in March to 108.6, up from an upwardly revised 107.4 in February. The PHSI increased year-over-year for the seventh consecutive month, and reached its highest level in 9 years.

Regionally, the March PHSI increased 4.0% in the South and 1.7% in the West. However, the March PHSI declined by 1.5% in the Northeast and 2.5% in the Midwest. Year-over-year, the PHSI increased in all four regions. The West, South and Midwest increased by 15.6%, 12.4% and 11.3% respectively from the same period a year ago, while the Northeast increased by a slight 0.6% over March 2014.

The string of positive pending sales released during the first quarter of 2015 contrasts with the disappointing first quarter GDP results released earlier. However, the good PHSI report suggests continued good news for the existing sales market and for builders in 2015.

Stephen Melman, J.D., is the Director of Economic Services at the National Association of Home Builders. Mr. Melman is a spokesman for NAHB’s forecast of new housing trends and the analysis of the home building industry. He has published numerous research articles on topics including industry structure and publicly traded builders. Before his...

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