The U.S. economy is getting a strong boost from the current housing market. Home prices in March jumped 10.2 percent from one year earlier, marking the biggest gain since 2006, reports The Wall Street Journal. Standard & Poor’s/Case-Shiller national index released on Tuesday indicates that prices have ticked up 1.2 percent in the first quarter of 2013.
As a result, consumer confidence is on the rise. Houses represent the largest financial assets for many Americans, so increasing home prices add to the overall sense of personal wealth. Second, underwater households with negative equity have the opportunity to stabilize. Prices are expected to continue to trend upwards over the summer season, especially with inventory falling short of consumer demand, says Ivy Zelman, chief executive of Zelman & Associates, a housing research and advisory firm.
Additionally, the low interest rates that are now beginning to tick up may prompt some would-be buyers to make their move before rates soar, according to Reuters. The 30-year fixed mortgage rate currently averages 3.9 percent, the highest level since May 2012, according to the Mortgage Bankers Association. Some analysts believe that increasing rates will move steadily. “People who were on the fence, they tend to get a sense of urgency as they see interest rates rise,” said Bob Walters, chief economist at Quicken Loans.