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Capital Economics: Seasonal Uplift Raises Prices

A monthly update from ""Capital Economics"":http://www.capitaleconomics.com/ holds that small upticks in home prices and sales reflect anomalous behavior in the market, thanks in part to a generous seasonal uplift. The report predicts continued falls in home sales, with these figures and others for prices constrained by still-brittle economic conditions.


""The recent rises in house prices are nothing more than the normal seasonal uplift triggered by the better weather and the end of the school year,"" Paul Dales, ""Capital Economics'"":http://www.capitaleconomics.com/ senior U.S. economist, said in the report. That said, the decline in the share of home sales accounted for by distressed sales has meant that seasonally adjusted prices have started to fall at a slower rate. We think prices will continue to edge lower.""


The report documented steady growth and continued uncertainty against a rough economic backdrop, citing the low number of sales ""dwarfed"" by an excess supply coupled with historically low mortgage rates and undervalued households.

Dales signaled signs of hope, citing expected revisions by the ""National Association of Realtors"":http://www.realtor.org/ (NAR) that would deflate the level of existing sales by about 10 percent and bring them nearer 4.5 million. He said that these figures from the ""NAR"":http://www.realtor.org/ would help narrow the chasm between existing and new sales, with new sales declining by 2.1 percent month-over-month in May, just 77 percent from a record peak in 2005. Despite this small hope, he added that low demand will continue to destabilize mortgage applications.

""There are few signs that a meaningful rise in housing demand is in the pipeline,"" he said.

Dales also mentioned the lack of news about a possible default by the U.S. federal government as cause for considerable concern.

""There are few signs that an agreement to raise the Federal Government debt ceiling is close,"" he said. ""If Congress doesn't agree on a deal by early August, the [U.S.] would be forced to default on some of its obligations, which could boost bond yields and hit economic activity.""

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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