Economy Watch: Annual Home Prices Increase; Consumers Optimistic; Philly Fed Against QE3
- Sep 26, 2012
According to the S&P/Case-Shiller Home Price Indices, which were released on Tuesday, average U.S. home prices increased by 1.5 percent for the 10-city composite index and by 1.6 percent for the 20-city composite index in July 2012 compared with June. For the third consecutive month, all 20 cities and both composites recorded positive monthly changes, and it would have been the fourth in a row, except that prices slipped by 0.6 percent in Detroit back in April.
The 10- and 20-city composites posted annual increases of 0.6 percent and 1.2 percent in July 2012, up from unchanged and up 0.6 percent posted in June 2012. Sixteen of the 20 cities saw home values rise year-over-year, and while Atlanta remains the weakest city, the area managed to cut its annual loss to just under 10 percent.
“Among the cities, Miami and Phoenix are both well off their bottoms with positive monthly gains since the end of 2011,” David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, noted in a statement. “Many of the markets we follow have seen some decent recovery from their respective lows – San Francisco up 20.4 percent, Detroit up 19.7 percent, Phoenix up 17 percent and Minneapolis up 16.5 percent, to name the top few. These were some of the markets that were hit the hardest when the housing bubble burst in 2006.”
Consumers Feeling Better, Too
The Conference Board Consumer Confidence Index, which was released on Tuesday, improved markedly and unexpectedly in September after an August decline. The index now stands at 70.3 (the happy year 1985 = 100), up from 61.3 in August. Better, but not terrifically confident.
Consumers’ feelings about current conditions improved slightly in September, with those claiming business conditions are “good” edging up to 15.5 percent from 15.3 percent, while those saying business conditions are “bad” declined to 33.3 percent from 34.3 percent. Consumers’ assessment of the labor market was also more upbeat, with those saying jobs are “plentiful” rose to 8.3 percent from 7.2 percent, while those asserting that jobs are “hard to get” edged down to 39.9 percent from 40.6 percent.
Consumers were also more optimistic about the short-term outlook in September. Those expecting business conditions to improve over the next six months increased to 18.2 percent from 16.7 percent, while those expecting more jobs in the months ahead increased to 18.5 percent from 15.8 percent. “Despite continuing economic uncertainty, consumers are slightly more optimistic than they have been in several months,” explained Conference Board director of economic indicators Lynn Franco in a statement. Could the housing market have anything to do with it?
Plosser Against QE3
Charles Plosser, president of the Federal Reserve Bank of Philadelphia, came out as QE3 skeptic on Tuesday in a speech before the CFA Society of Philadelphia and the Bond Club of Philadelphia. Plosser said that he was against the stimulus undertaken by FOMC earlier this month, which will mean $40 billion in bond buying by the Fed each month for an unspecified period, because the problems in the labor market can’t be addressed through this kind of central bank action.
Wall Street was listening to Plosser, apparently, and some investors rushed to sell. The Dow Jones Industrial Average lost 101.37 points, or 0.75 percent, while the S&P 500 was down 1.05 percent and the Nasdaq dropped 1.36 percent.