Jun 12 2005
Despite broad speculation about a housing bubble, real median home prices were up a modest average of 1.8 percent during February, March and April compared with a year earlier, according to Deloitte Research's Leading Index of Consumer Spending.
As recently as December 2004, real home prices were rising at double-digit rates. "There has been much discussion recently about a housing bubble, but the truth is that home price appreciation has slowed considerably in the past three months. The time to talk about a bubble was last December," says Carl Steidtmann, chief economist of Deloitte Research and author of the monthly index.
"Consumer spending growth in the summer months will be largely dependent on the direction of home prices and job growth," continued Steidtmann. "As job growth continues to accelerate, we should see a corresponding pickup in real wage growth."
Highlights of the index, which tracks consumer cash flow as an indicator of future consumer spending, include:
- After a year of modest declines, real wages now appear to be declining at an accelerating rate, as rising energy prices push up the cost of living and rising benefit costs hold down wage increases. In May, real wages were down 1.1 percent from a year ago.
- Initial unemployment claims fell in May by approximately 10,000 claims per week, helping to offset the weaknesses in other components of the index.
- Home price appreciations have slowed sharply, despite volatile housing markets on the East Coast and in Florida.
- The tax burden has risen slightly since March 2004 as continued economic growth pushes some households into higher income brackets.
The index, comprising four components -- tax burden, initial unemployment claims, real wages and real home prices -- fell in May to 3.80 percent, from a downwardly revised gain of 3.98 percent in April.
Posted June 13th