Tag Archives: ben bernanke

fulton

Home prices increase by most in 7 years

U.S. home prices jumped 12.1 percent in April from a year ago, the most since March 2006. More buyers and a limited supply of available homes have lifted prices in most cities across the country, a sign of a broad-based housing recovery.

“The increase in the number of people looking for a new home often runs parallel to a jump in home prices,” said Doug Fulton, CEO of Fulton Homes. “We are seeing steady growth in all of our communities, so it was no surprise to see the data from this new report. It’s great that more people are buying new homes, but it’s even more encouraging that more people are visiting our communities and showing serious interest in our homes.”

The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday also rose 2.5 percent in April from March, the biggest month-over-month gain on records dating back to 2000.

All cities except Detroit posted gains in April from March. That’s up from only 15 cities in the previous month.

Prices rose from a year earlier in all 20 cities for the fourth straight month. Twelve cities posted double-digit gains. San Francisco, Las Vegas, Phoenix and Atlanta all had price increases over the past year of more than 20 percent, while Detroit and Los Angeles showed gains of nearly that much. Minneapolis posted a 15 percent gain.

The housing recovery is looking more sustainable and should continue to boost economic growth this year, offsetting some of the drag from higher taxes and federal spending cuts. Steady job gains and low mortgage rates have encouraged more people to buy homes.

David Blitzer, chairman of the index committee, said the housing recovery should continue even with mortgage rates rising. Borrowing rates have jumped after Federal Reserve Chairman Ben Bernanke said last week that the Fed could slow its bond-purchase program, which is intended to keep long-term interest rates low.

“Home buyers have survived rising mortgage rates in the past,” Blitzer said, “often by shifting from fixed rate to adjustable rate loans.”

Blitzer said the bigger issue for the housing market is banks’ willingness to lend. A recent survey by the Fed suggested some banks are easing credit standards.

Still, Stan Humphries, chief economist at real estate data provider Zillow, said rising rates and an increase in the number of sellers should temper price gains in the coming months.

“The national housing recovery is strong and sustainable, but pockets of volatility will emerge,” he said. “Buyers expecting home values to continue rising at this pace indefinitely may be in for a shock.”

The index covers roughly half of U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The April figures are the latest available.

Prices are rising because demand is up and fewer homes are available for sale. That’s made builders more optimistic about their prospects, leading to more construction and jobs.

Stock Market

The Dow Reaches 12,000 — Where Will We Go From Here?

The Dow Jones Industrial Average briefly climbed to 12,000 on Jan. 26. Is this a sign of hope for our economic growth? The last time the Dow traded at the 12,000 level was in June 2008, when our economy was just starting to see the effects of job losses, dollar value changes, tax concerns, mortgage defaults, and monetary policy struggles. Although we still face some of these challenges today, we are gradually seeing improvements in some areas of our financial economy.

The most positive are corporate earnings. Reported by Bloomberg, 88 out of the 120 estimates of quarterly earnings exceeded predictions. Corporations with strong business models regained some strength by scaling back and many competitors are no longer in the game to compete. Analysts predict similar expectation earnings for 2011. If analysts are correct, then we expect the equity market to improve and draw strength from our economic growth.

Some economic issues have improved since 2008, but many still persist. In order for the economy to regain its strength, long-term, several key metrics will need to improve.

The value of the U.S. currency must stabilize in comparison to other currencies. As for taxes, once China’s tax reform goes into effect the U.S. will have the highest business tax rates than other developed countries.

Federal spending has exploded in the last few years, but some could argue that it was needed to help avoid a worse recession. Our national debt has reached the $14 trillion marker and will take decades to reduce.

Ben Bernanke, chairman of the U.S. Federal Reserve, has great responsibility overseeing monetary objectives. The control of our money supply and interest rates either expands our economic growth or contracts it. When we experience a dramatic market change like 2008, it is much more difficult to predict the results of monetary decisions. Now that there is less uncertainty we may see progress in this area.

It’s been nearly 18 months since we exited our recession. Is our economic environment better? Yes, but it is improving very slowly and there are still many issues to work out. Hitting the 12,000 mark on the Dow provided some comfort for investors. We also had positive growth with the U.S. GDP — it expanded by 3.2 percent in the fourth quarter following a 2 percent annual rate in the third quarter, according to Bloomberg. As investors, we must continue to focus on our objectives and refrain from making decisions on emotions.