Housing market comeback heats up

Don’t count the U.S. housing market out just yet.

A fresh stream of positive data indicates it's on the upswing after a long stretch of shakier growth.

New home sales in October were the best since 2007, based on Commerce Department data, and building permits, a sign of future activity, rose the most in 12 years. Prices of existing homes rose 6.2 percent with increases nationwide, according to the National Association of Realtors.

"I’ve been all over the country and builders are really, really gung-ho,” National Association of Home Builders CEO Jerry Howard told FOX Business’ Stuart Varney earlier this month.

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More supporting factors include low mortgage rates, sitting at 3.66 percent, and tight supplies. Solid lending trends are also helping, with mortgage originations on pace to hit over $2 trillion, the best year since 2007. And the latest Case-Shiller Index report showed prices increased in all but one of the 20 cities tracked: San Francisco. The index’s 3.2 percent annual growth was its first acceleration in 18 months.

The new data marks a sharp turnaround from just last month, when a blog post by Benn Steil and Benjamin Della Rocca of the nonpartisan think tank Council on Foreign Relations warned the housing market’s slowdown was signaling the U.S. economy would slide into recession before Election Day 2020.

“In 2018, as in 2005, housing-price growth began falling rapidly, with significant price drops occurring in several major markets,” they wrote, noting the trend-line in existing-home sales growth has been down since 2015 and turned negative last year.

“Similar drops have preceded nearly every recession since 1970,” they said, adding that a continuation of the trend would lead to “broad falls in home prices beginning by mid-2020, which will, in turn, drag down household spending against a darkening economic backdrop.”

Matthew Pointon, a property economist at Capital Economics, says waning homebuyer confidence and tightening credit availability “argue against a further acceleration in prices” next year. Since lower interest rates will likely support the housing market, however, it might outperform his forecast, he said.

Mortgage rates have fallen sharply this year as the Federal Reserve has gone from aggressively hiking interest rates to cutting. The central bank has reduced them three times since July, pushing the 30-year mortgage rate down from a peak of about 5 percent.

On Monday, Fed Chair Jerome Powell said the changes are supporting key areas of the economy "such as housing and consumer durable goods."

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Redfin CEO Glenn Kelman concurs. "The Fed is going to keep rates low, the mortgage markets have priced that in, and that’s going to keep demand strong," Kelman told FOX Business' Liz Claman.

“The market is going to heat up, buyers are going to compete with each other, it's going to get a little bit nasty," he said. "The affordability crisis that’s affected the coast is going to come to the middle of the country,” he concluded.