U.S. Economy Archives - Page 11 of 107 - Money Morning - Only the News You Can Profit From
Why U.S. Home Prices Have Been on a Tear
In another sign the housing recovery is genuine, home prices soared the most in more than seven years in April in 20 U.S. cities.
The S&P/Case-Shiller index, released today, climbed 12.1% from April 2012, marking the biggest year-over-year increase since March 2006, and rose 2.5% from March to April.
“The recovery is definitely broad-based," David M. Blitzer, chairman of the S&P's index committee, said in a news release. "Recent economic data on home sales and inventories confirm the housing recovery’s strength."
Experts cited an improving job market, low mortgage rates, high demand and a shortage of housing on the market.
Meanwhile, new home sales rose a bit less than expected in May but climbed a whopping 29% compared with May of last year.
All 20 cities in the S&P/Case-Shillert index, which includes metropolitan areas, showed year-over-year increases in home prices.
San Francisco posted the biggest gain, 23.9%, followed by Las Vegas, at 22.3%. Atlanta, Detroit, Los Angeles, Miami, Minneapolis, Phoenix, Portland, San Diego, Seattle and Tampa showed double-digit gains.
Homebuyers in Bidding Wars
Home prices in Dallas increased 7.4%; in Washington, D.C., 7.2%; and in Cleveland, 4.8%. The smallest increase was in New York, at 3.2%.
Even with the increases, home prices aren’t rising fast enough to price buyers out of the market. Indeed, competition for homes has led to bidding wars in some places, including Los Angeles, Boston, San Francisco, Seattle, Washington, New York, Miami and Phoenix.
And home prices haven’t even approached levels seen during the housing bubble.
Celia Chen, an analyst with Moody's Analytics, told Money Morning that home prices still remain 26% below peak bubble levels.
“The recovery’s alive and well,” Jed Kolko, chief economist at the real estate site Trulia.com, told Money Morning. “Prices continue to rise, new home sales are up and delinquencies and foreclosures are falling.”
Higher prices have also rescued many underwater homeowners.
Kolko noted an extraordinary statistic: It’s cheaper to buy than to rent in the top 100 U.S. housing markets.
At the same time, the inventory of houses available for sale has begun increasing as higher prices have prompted more homeowners to list their homes and more homebuilders to construct new homes.
And one of the nation’s largest homebuilders, Lennar Corp. (NYSE: LEN) reported today it beat analysts’ estimates for the three months through May as prices and sales increased.
Lennar Chief Executive Officer Stuart Miller said on a conference call today he wasn’t too concerned about rising interest rates.
“Interest rates are moving higher in the context of economic improvement,” Miller said. “We’re looking at a supply shortage, so that means that even in the context of rising rates and a better economy, we’re likely to see price increases and rental increases.”
Last week, a new survey of homebuilder confidence from Wells Fargo Bank and the National Association of Home Builders reached its highest level since 2006, and housing starts climbed 6.8% in May and 28.1% year to date.
Is PIMCO's Bill Gross Wrong Again?
Stuart Varney put the question directly to me last week during his Fox Business show:
What do I make of comments from PIMCO's Bill Gross…that he's projecting a 60% chance of a global recession in the next three to five years?
Now, Bill Gross is obviously one of the most powerful men in the world. PIMCO, the firm he founded, is the world's biggest bond manager. He has assets under management of more than $2 trillion (that's right, with a "t").
So what exactly do I think about Mr. Gross's latest prediction? Not much.
This is like predicting 10 of the last two recessions…eventually he'll get it right.
8 Reasons Your Dollar Doesn't Go As Far As it Did 10 Years Ago
Patients' hospital expenses have nearly doubled in the past decade. So, too, has the price of college textbooks. And gas prices have more than doubled, while prices of fuel oil and other fuels for home use have climbed a whopping 145%.
It's been a tough decade on the wallet, thanks to inflation.
The figures are based on a Yahoo! Finance analysis of items and services tracked by the Bureau of Labor Statistics' Consumer Price Index.
And the CPI, of course, is based on government stats which, as Money Morning has reported, routinely understate inflation.
Here are 8 reasons why inflation is pinching you, no matter what the Fed says about low inflation:
How Big Corporations Are Destroying the "Free Market"
As an economist, I wince whenever I hear someone say that we live in a true free market.
The reality is we live in a semi-free market where regulation stifles business and corporate money influences and distorts what would normally be a highly competitive marketplace.
And over the last two decades, the situation has only gotten worse for consumers, producers, and defenders of the so-called "free market."
From 2008 to 2010, 30 major corporations paid more money in lobbying fees than they did in taxes, according to the Public Campaign.
But while traditional lobbying once centered on altering tax rates and encouraging legislation to liberalize and deregulate the economy, it has now evolved into a competitive weapon for companies trying to box out competitors and raise barriers to entry in their markets.
It's a business phenomenon that I like to call the "Rise of the Fifth Rail."
You see, in traditional markets, companies compete on four specific principles: Price, product quality promotion, and place (market access). These principles are known as the "four P's."
The first three are self-explanatory in that customers want the highest quality product at the cheapest price. Companies use promotional techniques to instill a need for its products and do so by marketing against the offerings of a competitor.
The fourth principle centers on a company's ability to reach new markets and still provide low prices for high-quality products. A strong coordinated distribution network tends to make this possible.
Naturally, when all four work together, you end up with a company like Walmart (NYSE: WMT), which has the ability to provide low, everyday prices due to its best-in-class distribution network.
But over the last few decades, this new phenomenon of using lobbying as a competitive tool has altered the course of market economics, and driven fair competition into the ground.
And that phenomenon is rotting the American free market from the inside.
Symptoms Don't Lie
A good doctor will not simply make a diagnosis based on measurements. The symptoms and complaints expressed by the patient are at least as important in making a determination as the data provided by diagnostic tools.
When the data says one thing and the symptoms continuously say another, it makes sense to question the reliability of the instruments.
This would be particularly true if the instruments are furnished by a party with a stake in a favorable diagnosis, say an insurance company on the hook for treatment costs.
April Employment Report Begins to Show the Signs of the "Obamacare Effect"
Economists breathed a sigh of relief when the Labor Department reported a better than expected April employment report on Friday, but the details show cracks still remain.
Many of the job gains proved to be in lower paying fields and the average number of hours worked dipped.
In fact, April's report revealed the average workweek for private sector employees declined 0.2 hour to 34.4 hours.
The data also suggests The Affordable Health Care Act, aka Obamacare, is already having an impact on hiring since job growth has slowed most significantly among businesses with 50-499 employees.
This could be the reason why…
Is This the End of Cheap Chinese Labor?
It's been the lament of everyone for years now: Cheap Chinese labor is killing the job market.
With lower wages and lax regulation, the giant sucking sound we heard was manufacturing jobs headed from Sheboygan to Shenzhen.
But now China's new found riches are starting to turn in on themselves in the form of much higher wages.
In fact, The Wall Street Journal has found that over the past decade – while no one was watching – manufacturing wages in China have gone up – conservatively – by 20% annually.
And as those workers pocket ever-fatter paychecks, they're demanding more in the way of decent working conditions and better hours. And that costs money.
It's not that much different than what happened in the United States in the early 20th century. It's just that China is doing it much faster.
Has Sequestration Saved the U.S. Economy?
There's a Jamaican saying, "the higher the monkey climbs up the tree, the more his butt is exposed."
The point being that the more we rise, the more vulnerable we become.
That has truly come to pass for a pair of superstars of the dismal science. And it could have a big impact on how successfully (or unsuccessfully) we can get the U.S. economy back on the rails.