Housing Improving, Policy Headwinds Remain Strong

Washington, D.C. — House prices ticked up in April after an eight-month decline. As house prices begin to stabilize, they are likely to support improving housing demand. Providing an early sign of a pickup, the Realtors' Pending Home Sales Index bounced back in May after a sharp decline the previous month. Half the architects recently surveyed by the National Association of Home Builders said their business was improving. And the third consecutive quarter of improvement in NAHB's Multifamily Production Index points to further growth in multifamily starts.

Not so encouraging, new single-family home sales remained weak in May, townhouse construction is lagging other components of residential construction and construction spending continued its downward trend. Consumer confidence was down again in June. And real GDP growth slowed to 1.9 percent in the first quarter, with early data indicating a weak second quarter. 

Despite polls by NAHB and The New York Times showing that owning a home remains a priority for most Americans, policy debates in Washington over key housing policies continue. The mortgage interest deduction faces continued calls for its elimination or curtailment as policymakers wrangle over measures necessary to address the national debt. 

The Congressional Budget Office is forecasting large federal government deficits over the next decade, raising the possibility of tax increases for home buyers, home owners and small businesses. If not scaled back, the deficits will eventually push up interest rates; choking off credit to buyers and builders.