What's going on?

In the US, data released this week continued to point to strong demand for houses but relatively limited supply � you�ve got one guess what that means for prices�

What does this mean?

Yes� prices are going up. Well, they�ve gone up by 5.7% versus one year ago. Home prices have now increased every month for 49 straight months � and that seems set to continue. Interestingly, the number of new homes starting to be built fell by almost 10% in March � although that was perhaps because they rose quite a bit in February. It is a little odd that there is strong demand for housing but a seemingly lukewarm building environment for new homes: it wouldn�t be surprising to see house building increase in the coming months. If it doesn�t, continued limited supply will likely continue to push house prices higher.

Why should I care?

For you personally: Low interest rates help demand for houses � big time. Of course, lots of people borrow money in order to buy a house. If people are paying a low interest rate on that mortgage, they can probably afford to pay more for a house. Recently, we�ve been reporting on the decreased likelihood of the US Federal Reserve raising interest rates as much this year as was previously expected. If that�s true, it should be positive for house prices.

The bigger picture: The lukewarm homebuilding environment is another concern for first-quarter US economic growth. Homebuilding is an important part of the economy not just because it creates jobs for plumbers and construction workers, but because people that purchase new homes tend to spend a lot of money fitting them out (new sofa, new TV, etc.). So if homebuilding is soft, it doesn�t bode well for the overall economy.