A host of positive economic news suggests increased confidence in the financial markets, and this should lead to a stronger real estate market in 2013.

To begin, the Federal Reserve chairman’s, Ben Bernanke, recent comments suggest that that the Fed will continue its accommodative stance on money supply and that its bond-buying program will continue. This alleviates concerns from investors that the program may be scaled back and with it reducing liquidity in the marketplace.

In response to Bernanke’s comments, the stock market continued its upward march. On February 27, 2013, the Dow Jones Industrial Average surged 1.2% to close at 14,075, eclipsing its previous peak from October 2007. The major stock indices are up six to seven percent year-to-date.

There is a variety of positive news from the housing sector as well:

• Pending home sales rose 4.5% in January 2013, reaching levels not witnessed since April 2010
• Home prices soared 7.3% in Q4 2012
• Total home sales jumped 15% in January 2013 from the prior month and 30% year-over-year

Following on from the news, stock prices for the major homebuilders rose, with Hovanian Enterprises (NYSE: HOV) closing up five percent on the day. Some of the major homebuilders have outperformed the broader market in 2013, for example DR Horton (NYSE: DHI) gained 13% in the first two months of 2013.

Durable goods orders dropped 5.2% to $11.8 billion in January 2013. While this level was below expectations, economists point out that the drop was exacerbated by volatility in the transportation sector. This sector witnessed a 10 percent jump in December 2012 and then plummeted 20 percent in January 2013. The orders for non-transportation goods actually increased 1.9% during the month, prompting Paul Ashworth, Chief Economist at Capital Economics, to comment that the order levels are much better than suggested by the data.

With the increasing globalization of the financial markets, investors are keeping an eye on Europe, particularly some of the southern Eurozone countries, like Greece, Spain and Italy. The Italians in particular have been under scrutiny given the recent elections. However, they completed a successful auction for €6.5 billion worth of government bonds, thereby removing, at least temporarily, a revival of the Italian sovereign debt crisis.

The economic environment suggests renewed optimism among investors. The strength of the equity markets and the Fed’s prevailing QE program should continue to support the positive trends in the real estate market, which is expected to perform well in the coming months.