A surge in US home prices helped the stock market bounce back yesterday, following a two day slump which had seen indexes take a nosedive over rising fears in the European economy.
The Dow Jones Industrial saw a frenetic day’s trading, ending 99.22 points higher at 13,979.30 on Tuesday, wiping out most of the substantial losses it saw on the previous day’s trading. Elsewhere, other markets also saw substantial gains, with the Standard & Poor’s 500 rising by 15.59 points to 1,511.29, and the NASDAQ composite gaining by 40.41 points to 3,171.58.
The advance came about following the release of new data by CoreLogic, which shows that home prices in the US have risen at their fastest pace for more than six years. According to the data, home prices jumped by an impressive 8.3%, giving investor confidence a much-needed lift. Meanwhile European confidence also helped to boost US markets, with manufacturing and service businesses their rising to a ten-month high in January.
Brad Reynolds, chief investment officer at LJPR Inc, told the Press Association that the big question for investors now was whether or not yesterday’s rally would have legs and continue for a second day.
“The market is extremely skittish right now. That’s why we’re seeing such big moves,” said Reynolds.
It’s no surprise that housing would help to give markets such a big lift, when one considers the kind of positive effects a healthy real estate industry would have on the overall economy. Given that the US economy surprisingly contracted last year, many analysts are looking to a burgeoning real estate recover to drag the US back onto the right track.
The most obvious benefit from a sustained housing recovery would be the creation of new jobs in the construction industry, reports the NPR. 28,000 new jobs were added in last January alone, while 296,000 jobs have been created in the industry since January 2011. Should the housing market ever be able to return to a ‘normal’ state, experts predict that it could generate some 2.9 million jobs throughout the country, the effects of which would reverberate throughout the greater economy.