Real Estate Outlook: Consumer Spending Rises
by Carla Hill
The economy in late 2010 may have grown at a quicker pace than some analysts previously thought. The Commerce Department reported that gross domestic product (GDP) was up 3.1 percent in the last quarter of 2010, thanks in part to large rises of corporate profits.
Consumer spending was up as well, this being the eighth straight month of increases. Spending rose 0.7 percent in February. The department also reported that inflation accelerated at its fastest rate since June 2009. Incomes also rose in February by 0.3 percent. Spending, however, is expected to have slowed this first quarter of 2011.
But when it comes to the housing, the good news isn’t spread so liberally. Residential vacancies, largely steeped by foreclosed homes, are depressing sale prices and property values.
And future numbers don’t look promising. Vacancies are up 13 percent over last week’s report, and up 12.1 percent from 2007 levels.
There was one bright spot in the market last week, though. Pending home sales, compiled by a National Association of Realtors’ survey, were up by 2.1 percent in February over the month prior. And while this is 8.2 percent below figures from February 2010, they are still a promising trend.
Lawrence Yun, NAR chief economist, says it’s important to look at the market with broad strokes. “Month-to-month movements can be instructive, but in this uneven recovery it’s important to look at the longer term performance,” he said. “Pending home sales have trended up very nicely since bottoming out last June, even with periodic monthly declines. Contract activity is now 20 percent above the low point immediately following expiration of the home buyer tax credit.”
Regionally, the area with the largest increase was the West, up by 7.0 percent. It is the only region experiencing higher levels of pending sales than a year prior. The Midwest wasn’t far behind, with a 4.0 percent rise for the month.
“We may not see notable gains in existing-home sales in the near term, but they’re expected to rise 5 to 10 percent this year with the economic recovery, job creation and excellent affordability conditions providing confidence to buyers who’ve been on the sidelines,” Yun said.