US consumer confidence hit 16-year peak in March
Home prices rose in Jan by most in 2-1/2 years
US consumer confidence continued to soar in March, hitting its highest level in more than 16 years, the Conference Board announced yesterday.
The index, which hit a 15-year record in February, spiked nearly 10 points, backed by the enthusiastic short-term outlook among consumers. The index now stands at 125.6, a big jump from 116.1 in February, and the highest since December 2000. Analysts had been expecting a decrease of nearly three points. “Consumers’ assessment of current business and labor market conditions improved considerably,” said Lynn Franco, the Conference Board’s director of economic indicators.
“Consumers also expressed much greater optimism regarding the short-term outlook for business, jobs and personal income prospects,” she said in a statement. The Federal Reserve has cited rising consumer sentiment when it tightened benchmark interest rates twice in recent months. President Donald Trump’s election in November sparked a wave of economic optimism on hopes for his aggressively pro-growth agenda of tax cuts, slashed regulation and infrastructure spending.
The good mood coincided with steady job growth and falling unemployment, trends inherited from the prior administration. However, the cut-off date for the survey was March 16, meaning it did not incorporate last week’s collapse of Trump’s efforts to repeal the Affordable Care Act.
Some observers say defeat of a primary campaign promise threatens to derail other key parts of his agenda and it sparked a pullback on a previously exuberant Wall Street.
The survey nevertheless captured a very positive mood. The share of respondents saying business conditions are “good” rose to 32.2 percent from 28.3 percent, while those saying conditions are “bad” fell to 12.9 percent from 13.4 percent. The short-term outlook also showed strong gains, with those expecting business conditions to improve in the next six months jumping 3.2 points to 27.1 percent and those fearing they would worsen falling 2.1 points to 8.4 percent. Consumers also expected more and better paying jobs in the months ahead, with those expecting more plentiful employment rising 3.9 points to 24.8 percent and those foreseeing higher pay increasing by 2.3 points to 21.5 percent. US home prices jumped in January from a year earlier at the fastest pace in nearly 2-1/2 years, as a tight supply of houses for sale spurred bidding wars in many cities.
The Standard & Poor’s CoreLogic Case-Shiller 20-city home price index, released yesterday, increased 5.7 percent in January, the most since July 2014. Americans stepped up home buying in January, even as mortgage rates rose. Many buyers likely sought to close their deals before rates increased further.
The Federal Reserve implemented its third rate hike in two years March 15, but economists at S&P Dow Jones Indices say higher rates won’t slow sales until later this year.
The biggest price gains were in Seattle, Portland and Denver, which have topped the other cities in the index for months. Mark Fleming, chief economist at First American, said that still-low mortgage rates and steady hiring will likely support further housing demand.
“Low mortgage rates and economic growth set against a low inventory of homes for sale will drive a strong sellers’ market and further rising prices this spring,” Fleming said.
David Blitzer, chairman of the S&P Dow Jones Index Committee, said that the Fed’s most recent increase won’t push up mortgage rates very much and shouldn’t affect sales. Average 30-year mortgage rates typically track the yield on the 10-year Treasury note.
That yield is usually driven by several factors, including broader economic conditions and investor demand for safe assets such as Treasurys. Still, should the Fed raise rates three or four more times this year, “rising mortgage rates could become a concern,” Blitzer said. Fed officials currently forecast two additional hikes.
Robust price gains could eventually make housing less affordable, Blitzer said. That may already be discouraging some homeowners from “trading up” to a new home, making the supply crunch worse as fewer people put their homes up for sale.
“At some point, this process will force prices to level off and decline - however we don’t appear to be there yet,” Blitzer said.
There were just 1.75 million homes listed for sale in February, 6.4 percent lower than a year ago, near the lowest level since the National Association of Realtors began tracking the data in 1999. — Agencies