Economy Watch: Home Prices Continue Upward

By Dees Stribling, Contributing Editor  

According to the latest S&P Case-Shiller Home Price Indexes, which were released on Tuesday, residential property prices are still on the rise. The national composite index was up 3.6 percent in the third quarter of 2012 compared with the same quarter in 2011, and up 2.2 percent compared with 2Q12.

In September 2012, the 10- and 20-city composites showed annual increases of 2.1 percent and 3 percent, respectively. Average home prices in the 10- and 20-city composites were each up by 0.3 percent in September versus August 2012, and 17 of the 20 MSAs and both composites posted higher annual increases in September versus August 2012. Detroit and Washington D.C. recorded a slight deceleration in their annual rates, while New York saw no change.

“Home prices rose in the third quarter, marking the sixth consecutive month of increasing prices,” David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, noted in a press statement. “We are entering the seasonally weak part of the year… [but] despite the seasons, housing continues to improve.”

Total household debt drops in 3Q

In its latest Quarterly Report on Household Debt and Credit, the Federal Reserve Bank of New York reported on Tuesday that during the third quarter, non-real estate U.S. household debt jumped 2.3 percent to $2.7 trillion. The increase was due largely to swelling student loans (up $42 billion), but auto loans (up $18 billion) and credit card balances (up $2 billion) did their part as well.

Also during 3Q12, total consumer indebtedness shrank $74 billion to $11.31 trillion, a 0.7 percent decrease from the previous quarter. The Fed attributed the drop to a sizable decrease in mortgage debt (down $120 billion) and home equity lines of credit (down $16 billion), despite mortgage originations increasing for a fourth consecutive quarter.

“The increase in mortgage originations, auto loans and credit card balances suggests that consumers are slowly gaining confidence in their financial position,” Donghoon Lee, senior economist at the New York Fed, posited in a press statement. “As consumers feel more comfortable, they may start to make purchases that were previously delayed.”

Consumer confidence swings up

The Conference Board Consumer Confidence Index, which had declined in August, improved in September, according to the organization on Tuesday. The index now stands at 70.3 (the cheerful year 1985 = 100), up from 61.3 in August. The Expectations Index increased to 83.7 from 71.1, while the Present Situation Index rose to 50.2 from 46.5 last month.

Evidently, few consumers were worried about the fiscal cliff back in September, and the uncertain prospects associated the election didn’t worry people overly much, either. Confidence levels are roughly back to where they were in February 2012, which itself represented a rebound from the uncertain summer of 2011 (the resolution of which set up the fiscal cliff).

Wall Street was a little more glum than consumers on Tuesday, with the Dow Jones Industrial Average slipping 89.24 points, or 0.69 percent. The S&P 500 dropped 0.52 percent and the Nasdaq was down 0.3 percent.