The recovery in the US housing market is looking more solid and economists are increasingly confident about price rises next year as they raised their forecasts again in the latest Reuters poll published on Monday. Prices were expected to rise by 4.0 percent in 2013, as measured by the Standard & Poor's/Case-Shiller composite index of 20 metropolitan areas, according to the median response from 23 analysts who provided price forecasts.
This was up from a prediction of gains of 2.5 percent next year in the previous Reuters poll conducted in September, itself an increase from the 1.8 percent rise seen in a poll in July. "It's more light, less tunnel. The direction's there, things are getting brighter. But we're still in the tunnel. We've still got a ways to go before we can consider the housing market normalised," said Michael Gapen, senior US economist at Barclays Capital in New York.
Prices were expected to rise by 2.5 percent in 2012, stronger than a prediction of 1 percent in September's poll. Monday's poll also projected a 4.0 percent rise in 2014. "If you look at the wide range of housing indicators, it is clear that things are, quarter by quarter, better and better," said Torsten Slok, chief international economist at Deutsche Bank in New York.
"If there is any risk to the housing market, it is definitely on the upside," he added. The S&P/Case-Shiller index showed a 3.0 percent gain on a yearly basis in September. While the index has been on an upswing, it was only at mid-2003 levels in the third quarter of 2012, six years after the market began its slide that led to the US recession and a hit to the global economy. Even as worries grow about US tax increases and spending cuts that will kick in from January unless Congress can find a deal to avert them, J.P. Morgan economist Daniel Silver said he did not think they would reverse the housing market's direction.
"There might be a little bit of uncertainty related to the fiscal cliff, but I don't see that being a major housing factor," he said. One main reason for the housing recovery has been a pick-up in jobs growth, which remains relatively weak but has been slowly improving. The Labour Department announced better-than-expected November nonfarm payroll numbers on Friday and said the unemployment rate dropped to 7.7 percent.
The Federal Reserve is trying to support the US housing market with its open-ended program of buying $40 billion of mortgage-backed securities each month. Most of the analysts in the Reuters poll thought rising property prices would have little impact in boosting consumer spending and overall economic growth in 2013. Of the 27 economists who answered this question, 17 predicted "low impact" and three said they expected "very low impact."
Worries about the "shadow inventory" - homes which potentially could be foreclosed and flood onto the market - have eased: 19 of 24 economists who replied to the question said they believed the number of total monthly foreclosures has already peaked. Twenty-nine analysts in total contributed to the Reuters poll.