Home Buyers in U.S. Ignore Rising Rates ; Increase in House Prices Makes Real Estate Appear to Be Good Investment

By Dewan, Shaila | International Herald Tribune, June 26, 2013 | Go to article overview

Home Buyers in U.S. Ignore Rising Rates ; Increase in House Prices Makes Real Estate Appear to Be Good Investment


Dewan, Shaila, International Herald Tribune


A key home price index showed a 12 percent gain in prices in 20 cities in the last year, the largest gain since early 2006, before the market collapse.

Mortgage rates in the United States may be inching up, but they have not put a damper on the American housing market rebound, according to figures released on Tuesday that showed upward momentum in prices and sales.

The Standard & Poor's Case-Shiller home price index showed a 12 percent gain in prices in 20 cities from April 2012 to April 2013, the largest gain since early 2006, when home values began to slow in advance of the market collapse.

Stocks on Wall Street surged on a flurry of better-than-expected news, including increases in sales of new homes and consumer confidence. New homes were selling at a rate of 476,000 a year in May, up 2.1 percent from April, the U.S. Commerce Department reported.

The housing numbers continued a solidly higher trend of stronger sales, more construction and a dwindling number of homeowners stuck in the trap of owing more on their mortgages than their homes are worth.

A spike in interest rates after last week's comments by Ben S. Bernanke, the chairman of the Federal Reserve, had raised fears among some economists that higher mortgage costs could slow a rebound that promised to infuse the economy with spending on big- ticket items like furniture and dishwashers. But others argued that the housing recovery was driven more by an improving job market, pent-up demand and a severe shortage after so little was built during the recession.

"Inventories are low for both new and existing homes, as well as for rentals," said Stuart Miller, the chief executive of Lennar Corporation, the third-largest home builder in the United States. On Tuesday, Lennar reported a 53 percent rise in revenue in the second quarter of the year. "The monthly payment math continues to push families to find a way to purchase," Mr. Miller said.

Case-Shiller tracks prices in 20 markets. The 12.1 percent gain was the average increase. …

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