Real estate price data Tuesday should confirm that housing continued to stabilize this summer, even as the rest of the economy remained tepid.
The S&P/Case Shiller home price index is expected to be up one percent for July, when it is released at 9 a.m. ET. The FHFA home price index, released at 10 a.m., is expected to show a 0.7 percent gain in housing prices in July. The data follows on reports last week that showed housing sales were stronger than expected in August, rising 7.8 percent, and home builders sentiment jumped to a six-year high.
“It will probably be pretty strong, just because the mix is starting to work in their favor,” said Mesirow Financial chief economist Diane Swonk of the Case Shiller data. She said there were fewer foreclosures in July’s sales so the prices overall should be higher.
Housing data has pointed to a steady recovery, though at a still low rate of activity.
“We’re seeing more expensive houses in the mix, less distressed sales,” Swonk said. “Headlines have an impact on confidence.”
Homeowners’ equity increased over the last couple of quarters, as housing prices improved. The Fed’s latest data showed that homeowners’ equity increased to $864 billion in the second quarter, from the fourth quarter of 2011. LaVorgna said, in a note, that this improvement has lifted owners’ equity as a share of total real estate from 41.6 percent to 43.1 percent. The peak of owners’ equity share was 61.2 percent in the first quarter, 2001, and it fell to a record low of 37.2 percent in first quarter, 2009, he added.
Moody’s Economy.com chief economist Mark Zandi said housing is one factor that affects confidence, but not the main one. “It’s jobs, it’s gasoline prices. Stock prices are important,” he said. “ I think on the margin it’s starting to help. I think people are feeling better about their home. They know at least it’s not falling in value, and that’s a big step forward.”
Zandi also said the July period should show good price improvements, since the number of distressed sales was lower. However, he expects to see another wave of distressed sales coming, and that could impact prices in the winter season, when there are normally fewer sales. He said there are three million loans in foreclosure or seriously delinquent, in a pool of 49.5 million loans outstanding.
Gary Thayer, chief macro strategist at Wells Fargo Advisors, said the housing recovery is important, and especially now. “It’s coming at a good time,” he said. “In the past couple of years, there was some strength in manufacturing. The United States seemed to be starting to recover but more recently this year with the recession in Europe, we’re seeing some decline in orders. I think that’s creating some serious headwinds for our economy, and it’s good the housing market is doing its part to support economic growth.”