The housing market is as solid as it's been in the past decade, and the strong stock market could be one reason.
Supply and demand are generally "in equilibrium" around the country, said Ken Rosen, economics professor at the University of California, Berkeley. And certain regions are witnessing "the strongest price increases they've seen in years," he said.
New home sales in the first quarter clocked in at an annualized rate of 824,000, the highest reading since the last quarter of 1978, according to the Department of Commerce.
The steady growth of the stock market may have helped fuel some of these home purchases, said David Levy, economist with the Jerome Levy Institute, Mount Kisco, N.Y.
"The stock market added a little whipped cream to an already strong home market," he said. Potential homebuyers who invested money in the stock market last year in the hopes of earning enough for a down payment have gotten the money quicker than expected, he said.
In March, existing home sales also remained "healthy" at an adjusted annual rate of 4.11 million, said the National Association of Realtors. Existing home prices jumped 3.7% from a year ago to $120,000.
Consumer confidence figures, which indicate how Americans rate the current and future state of the economy, are also high. These figures often serve as an indication of consumers' willingness to purchase big-ticket items, like homes, in the months ahead.
Although the April consumer confidence index of 116.8 represents a slight dip from a month earlier, it still indicates "further expansion in the months ahead," said Lynn Franco, with the Conference Board, New York.
And the national homeownership rate has hit a 16-year high, at 65.6%, according to figures from the U.S. Bureau of the Census.
Urban, high-income areas have seen the greatest increase in demand and consequently in home prices. "There is an outright boom in demand in the (San Francisco) Bay area," said Mr. Rosen.
Mortgage lenders there are already feeling the effects: Integrated Capital, a San Francisco-based residential lender, is expecting 1997 loan volume to be 25% more than 1996, said president Anita Kwan. Home values there are also going up significantly, she said, as young professionals move in.
New York City is also experiencing a phenomenal increase in home prices, Mr. Rosen said. "The East and West coasts are probably the strongest (housing markets) in the country today," he said.
And the first-time-homebuyer market is expected to improve, Mr. Rosen said. "This is the low point" for that market, he said, because the number of Americans in the prime age group for first-time home buying-25 to 35-is smaller than it has been in decades.
Despite all the good news, for most housing economists the threat of recession or a stock market crash has become a monster under the bed: They aren't necessarily sure that it's there, but they're scared of it anyway.
"There's a real possibility that one of the two could happen," said Mr. Levy. "But as long as the economy stays reasonably healthy, there will be a strong housing market."
