Home prices will continue to rise

June 18, 2013

Prices at the consumer level rose by 0.1% in May led by a rise in housing costs, electricity and natural gas. Within the Consumer Price Index (CPI) report it showed that food prices declined by 0.1%. On a year-over-year basis, CPI rose by 1.4%, the second lowest level this year aside from the 1.1% gain year-over-year in April. When stripping out volatile food and energy, the Core CPI rose by 0.2%, just above the 0.1% expected and rose 1.7% year-over-year, matching the year low in April.

The Federal Reserve members kick off their scheduled 2-day FOMC meeting this morning on Capitol Hill where the they gather to discuss monetary policy and the U.S. economy. There is zero chance of a hike in the Fed Funds Rate, which is currently at 0.25%. The talk will most likely surround the onging Quantitative Easing III program, which is geared towards promoting job growth and stimulating the economy by lowering interest rates by way of purchasing massive amounts of Bonds each month…$85 billion to be precise.

The housing markets received some mixed news today. The Commerce Department reported that Housing Starts rose by 7% from April to May to 914,000 units on an annualized basis, but below the 950,000 that was expected. In addition, there was a 28.6% increase from May 2012 to May 2013. Building Permits, a sign of future construction, fell by 3% last month from April to 974,000 and below the 983,000 that was projected.

And the good news kept on coming for housing as Standard & Poor’s (S&P) reported that home prices will continue to rise, but it may not be the double digit gains that the market has seen. S&P does see housing starts rising by 28% in 2013 and 29% in 2014.