Magazine article American Banker

Stock Market May Have Fueled Home Purchases

Magazine article American Banker

Stock Market May Have Fueled Home Purchases

Article excerpt

The housing market is as solid as it's been in the past decade, and the strong stock market could be one reason.

Supply and demand are generally "in equilibrium" around the country, said Ken Rosen, economics professor at the University of California, Berkeley. And certain regions are witnessing "the strongest price increases they've seen in years," he said.

New home sales in the first quarter clocked in at an annualized rate of 824,000, the highest reading since the last quarter of 1978, according to the Department of Commerce.

The steady growth of the stock market may have helped fuel some of these home purchases, said David Levy, economist with the Jerome Levy Institute, Mount Kisco, N.Y.

"The stock market added a little whipped cream to an already strong home market," he said. Potential homebuyers who invested money in the stock market last year in the hopes of earning enough for a down payment have gotten the money quicker than expected, he said.

In March, existing home sales also remained "healthy" at an adjusted annual rate of 4.11 million, said the National Association of Realtors. Existing home prices jumped 3.7% from a year ago to $120,000.

Consumer confidence figures, which indicate how Americans rate the current and future state of the economy, are also high. These figures often serve as an indication of consumers' willingness to purchase big-ticket items, like homes, in the months ahead.

Although the April consumer confidence index of 116.8 represents a slight dip from a month earlier, it still indicates "further expansion in the months ahead," said Lynn Franco, with the Conference Board, New York. …

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