Our 'second recovery' scenario for next year received a lift from November's Housing Market index, which was reported Monday by the National Association of Home Builders. The index rose five points to 46 last month, the highest reading since May 2006. It is highly correlated with single-family housing starts. The NAHB's index of traffic of prospective homebuyers was unchanged at a 6½-year high of 35, up 17 points since April.
Existing homes sales rose 2.1% during October after falling 2.9% during September, and remain on a slow uptrend. Helping to boost demand is that single-family home prices are starting to move higher. The median price rose 10.9% year-over-year during October, the fastest pace since January 2006. Rising home prices should revive long-dormant buy-in-advance attitudes in the housing market.
The recovery in home prices is helping to boost consumer confidence. Imagine all the homeowners who have negative homeowners' equity, which may be turning less negative. Some of them might be able to refinance their mortgages. In early November, the Consumer Sentiment index jumped 2.3 points to 84.9, the highest since July 2007. This improvement was confirmed by the recent strength in the Bloomberg Consumer Comfort index.
Source: Ed Yardeni — Ed Yardeni is the president and chief investment strategist of Yardeni Research Inc., a provider of independent investment strategy and economics research for institutional investors.