Chicago, IL (PRWEB) January 02, 2014
As some Americans, including first-time home buyers, worry about the impact of rising mortgage rates next year, recent reports have revealed that the housing market and the U.S. economy appear to be on the upswing.
Home prices on the rise
According to the latest S&P/Case-Shiller Home Price Index, home prices rose 13.6 percent in October compared to a year ago in 10 major U.S. cities. On a 20-city composite, the index was also up 13.6 percent. The October gains represented the fastest spike in prices since February 2006, when the index was up 13.8 percent.
The index reached 17 consecutive months of growth in October when compared against the same month in the previous year. While price gains are a positive sign for the housing market, the rate of appreciation has many wondering if the U.S. is entering into bubble territory.
"In the housing market, it has its own momentum right now as people see it coming back," Robert Shiller, co-founder of the index, told CNBC on December 31st. "We're sort of in the beginnings of another housing bubble."
In terms of long-term growth and the housing market recovery, price jumps in the double digits are not sustainable and will affect buyers' ability to afford housing in certain markets.
The Federal Reserve recently announced it would begin to scale back stimulus spending by $10 billion in January. Interest rates are expected to rise in 2014 when the changes in fiscal policy take effect. With higher home prices, it is unknown how rising mortgage rates will affect homebuyers, but it is possible that the rate of recovery could be delayed.
Fortunately, the Fed made its decision after a positive November employment report, which revealed the national unemployment level dropped from 7.3 percent in October to 7 percent. Additionally, 204,000 jobs were added to the economy that month, on track with the Fed's expectations.
As 2013 comes to a close, Americans are feeling more optimistic about the economy and job market, which will be good for housing. According to a recent consumer confidence index by the Conference Board, Americans are feeling more confident about the economy in December than previously thought, beating economists predictions. The index rose to a reading of 78.1 points, up from 72 in November and above the estimate of 76.
Rising property values have helped contribute to the spike in confidence, as well as improving household finances and more hiring. The most recent findings have helped boost the stock market and provided hope that the economy will be better off in 2014. As consumer spending accounts for 70 percent of the U.S. economy, higher confidence is a positive sign that Americans will be more likely to spend more.
"The consumer will continue to do some of the heavy lifting for the economy," Ryan Sweet, a senior economist at Moody's Analytics Inc, told Bloomberg. "The job market is better. Stock prices are rising. The odds of another round of political brinksmanship are lower.
Contact the Federal Savings Bank, a veteran owned bank, to find out more about affordable housing options.