Economy Watch: Home Prices Continue Upward Trajectory

By Dees Stribling, Contributing Editor

CoreLogic reported on Tuesday that U.S. home prices were up 6.3 percent year-over-year in October. That figure includes distressed housing sales, and represents the largest annual increase since June 2006—when the housing market was still headed up that first roller-coaster hill—and the eighth consecutive increase in home prices nationally on a year-over-year basis.

On a month-over-month basis, including distressed sales, home prices decreased by 0.2 percent in October 2012 compared to September. Since CoreLogic’s calculations aren’t seasonally adjusted, decreases in month-over-month home prices aren’t usual in October, since that’s when the housing market enters its off-season.

Take distressed sales, including short sales and out-and-out REOs, out of the equation and CoreLogic says that U.S. home prices nationwide increased on a year-over-year basis by almost as much in October 2012: 5.8 percent. On a month-over-month basis excluding distressed sales, home prices increased 0.5 percent in October 2012 compared to September, which is the eighth consecutive month-over-month increase.

U.S. banks doing better

The U.S. banking business is still in recovery mode, according to the latest Quarterly Banking Profile released by the FDIC on Tuesday. Commercial banks and savings institutions insured by the agency reported aggregate net income of $37.6 billion in 3Q12, a 6.6 percent increase from the $35.2 billion reported during the same quarter in 2011. This marks the 13th consecutive quarter that earnings have registered a year-over-year increase.

Also noteworthy in the report was a decline in the number of banks on the FDIC’s “Problem List,” from 732 to 694. This is the sixth consecutive quarter that the number of “problem” banks has fallen, and the first time in three years that there have been fewer than 700 banks on the list. Total assets of “problem” institutions—those with a high risk of failure, which the agency doesn’t name for obvious reasons—declined from $282 billion to $262 billion.

The dollar value of REOs held by banks declined from $9.5 billion in 2Q12 to $8.8 billion in in the third quarter, the report also said. The dollar value of REOs hasn’t been that low since the first quarter of 2008, when they were about to explode in volume. Even during better economic times, FDIC-insured institutions always have some residential REO on their books, typically as much as $2.5 billion.

The back-and-forth on the fiscal cliff continued on Tuesday, with no obvious solution in sight, and Wall Street registered a small decline for the day. The Dow Jones Industrial Average lost 13.82 points, or 0.11 percent, while the S&P 500 was down 0.17 percent and the Nasdaq declined 0.18 percent.

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