Economy Watch: Fed Chairman to Congress: Pay Your Bills
- Jan 15, 2013
Fed chairman Ben Bernanke gave a speech at the University of Michigan on Monday, characterizing the U.S. economy as in a “relatively fragile recovery,” and noting that there has been only “modest improvement” in the labor market. Both are observations that one doesn’t need to be a central banker to make.
More to the point as a central banker, the chairman asserted that the Fed’s policy of bond-buying, popularly known as QE3, isn’t going to lead to “significant inflation,” and if things start to look that way, the Fed can exit that policy. Other members of the Fed are reportedly worried about the prospect of QE3-inspired inflation, as well as asset bubbles inspired by interest rates that have been low for a long time now. The chairman denied that Fed policy was causing any kind of bubble.
Bernanke also stressed the importance of raising the debt ceiling, expressing himself in a way that’s positively hyperbolic for a Fed chairman: “It’s very, very important that Congress take the necessary action to raise the debt ceiling to avoid the situation where the government doesn’t pay its bills,” he said. “Raising the debt ceiling gives the government the ability to pay its existing bills—it doesn’t create new spending.”
Home prices continue upward
FNC said on Monday that its composite index (the FNC 100-MSA, based on 100 markets) shows that home prices nationally were up 0.3 percent in November, the ninth consecutive month that prices have increased. For the 12 months ending in November, home prices rose 4.2 percent, the largest year-over-year increase since October 2006, the company reported.
Two-thirds of the component markets tracked by the company’s FNC 30-MSA composite index show continued price improvement in November. Las Vegas recorded the largest month-to-month increase, up 3.4 percent from October, with low inventory contributing to the market’s rapidly rising prices in recent months.
Phoenix is also rising from the ashes of the housing bubble at an unexpected clip, according to FNC. Home prices surged 23.6 percent compared with a year ago, with foreclosure sales making up only 13 percent of total home sales in November. By contrast, Chicago continues to lag behind other major cities in the housing recovery, with home prices declining 0.8 percent in the 12 months ending in November. The city’s foreclosure sales remain at elevated levels: about one in three homes sold are foreclosures or short sales.
Mortgage delinquencies edge up
In a related housing note, LPS, in its Mortgage Monitor report for November, said on Monday that 7.12 percent of U.S. mortgages were delinquent in November, up from 7.03 percent in October. The rate is down compared with November 2011, however, when 7.83 percent of mortgages were delinquent.
Also, 3.51 percent of U.S. mortgages were at some point in the foreclosure process in November. That’s down from 3.61 percent in October, and down from 4.2 percent in November 2011. Thus a total of 10.63 percent of mortgages are either delinquent or in outright foreclosure, calculates LPS.
The November LPS data also showed that the impact of Hurricane Sandy continued in zip codes hit hardest by the storm. While national delinquencies are moving in line with seasonal trends—rising slightly through the remainder of 2012—delinquencies increased sharply in those areas affected by Sandy. The national delinquency rate has increased by 3.7 percent since August 2012, but delinquencies in Sandy-impacted zips have risen at more than three times that pace, climbing 15.4 percent in Connecticut, 15.2 percent in New Jersey and 14.8 percent in New York.