The weak housing market has long handcuffed the economic recovery, but new data released today suggest a housing recovery may be gaining steam.
The latest S&P/Case-Shiller Home Prices Indices show home prices nationally were up 1.2 percent in the second quarter versus 2012, and up 6.9 percent from the first quarter of the year. In the New York metropolitan area, June home prices rose 2.1 percent over May of this year, though that represented a 2.1 percent downshift from a year ago.
Jeffrey Otteau, president of Otteau Valuation Group Inc., in East Brunswick, said New Jersey’s housing market is in a similar, relatively good spot.
Otteau’s firm found median home prices in New Jersey down half a percentage point in the second quarter versus the previous quarter, but he said the rates of decline have been shrinking. He said home prices tend to be a backward-looking indicator, because there is typically a two- to four-month lag between the time an existing home sale price is negotiated and the time the deal closes. The lag is even longer for new home construction.
“It’s really a look in the rearview mirror of where the housing market was,” he said.
Other indicators from the second quarter show positive movement. Home purchase contracts, for instance, were up 18 percent in the first half of this year versus 2011, according to Otteau. The stock of unsold inventory in New Jersey is at its lowest seasonally adjusted average since 2005, he said.
Another good sign is that foreclosures don’t seem to be making a major dent thus far. New Jersey had the second-largest backlog of unresolved foreclosures of any state, Otteau said, and if those homes all hit the market at once, it could depress prices and create a glut of excess housing. So far, he said, the release of foreclosures into the market has been relatively slow, and alternate resolutions — such as short sales or investors converting foreclosures into rental units — have helped keep homes off the market.
The bigger picture, Otteau said, is that a recovering housing market is a very good sign for the wider economy, because it typically means more construction and ancillary consumer spending, such as purchases of household goods and appliances.
“What we’re seeing is that the housing market has gone from being the caboose on the economic recovery train to being the engine that’s now pulling the economy,” he said.