Economy Watch: Home Prices Balloon in January
- Mar 06, 2013
The parade of residential real estate revival numbers continues: CoreLogic reported on Tuesday that home prices nationwide, including distressed sales, increased year-over-year by 9.7 percent in January 2013. That’s the biggest annual increase since April 2006 and the 11th month in a row that home prices were up annually, according to the company.
Excluding distressed sales—both short sales and REO transactions—and home prices increased year-over-year by 9 percent in January 2013. CoreLogic says that that all but two states, Delaware and Illinois, experienced annual price gains since January 2012.
On a month-over-month basis, including distressed sales, home prices increased by 0.7 percent nationwide in January compared to December. Take distressed sales out of the equation and home prices increased 1.8 percent in January compared to December. The company also predicts that in February, prices will be up 9.7 percent annually, including distressed sales.
Non-manufacturing sector still expanding
The Institute for Supply Management said in its latest Report on Business on Tuesday that economic activity in the U.S. non-manufacturing sector grew in February for the 38th consecutive month. In fact, the non-manufacturing index was up to 56 percent in February, an increase of 0.8 percentage points compared with January, indicating that the rate of growth was up a bit.
Most of the organization’s non-manufacturing indexes were up as well. The Non-Manufacturing Business Activity Index registered 56.9 percent, which is 0.5 percentage points higher than in January. The New Orders Index increased by 3.8 percentage points to 58.2 percent, and the Prices Index increased 3.7 percentage points to 61.7 percent, meaning that prices increased at a faster rate in February than January.
Only the Employment Index was down, by 0.3 percentage points, to 57.2 percent. Thus employment is still growing, but not quite as fast. On the whole, 13 non-manufacturing industries reported growth in February, and the majority of respondents’ comments reflect a growing optimism about the trend of the economy and overall business conditions.
A new high for Wall Street
The Dow Jones Industrial average spiked upward on Tuesday by 125.95 points, or 0.89 percent, to end the day at an all-time high, 14,253.77. Of course, the index is only composed of 30 stocks, and the high isn’t adjusted for inflation, but Wall Street is never one to let a milestone go by unnoticed.
Does the high point to an equities bubble? Arguably, since much of the run-up has been made possible by the influx of cheap money following the crash in 2008, a condition not destined to last forever. Also, the current level represents more than a doubling of the index since the most recent nadir in March 2009, and is already up 8.8 percent this year—the kind of movement often associated with bubbles.
On the other hand, if the economy manages to improve despite Washington dysfunction, energy prices and other ills, 14,000-plus might only be a stop on the way to higher records to come. In any case, the S&P 500 and the Nasdaq were up sharply on Tuesday as well, by 0.96 percent and 1.32 percent, respectively.