US home prices see best yearly gain since 2006

Updated 30 January 2013
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US home prices see best yearly gain since 2006

NEW YORK: US home prices rose in November to rack up their best yearly gain since the housing crisis began, a further sign that the sector is on the mend.
But data on consumer confidence yesterday was less encouraging, with moods falling to their lowest level in more than a year as Americans became more pessimistic about the economic outlook and their financial prospects in the wake of higher taxes for many.
The S&P/Case Shiller composite index of 20 metropolitan areas gained 0.6 percent in November on a seasonally adjusted basis, in line with economists' forecasts.
Prices in the 20 cities rose 5.5 percent year over year, making for the strongest yearly price increase since August 2006 when prices were on their way down.
The housing market became a bright spot for the economy last year as prices rose and inventory tightened. The sector is expected to contribute to economic growth in 2013.
"What we're seeing is really a gradual improvement in the overall economy," said Anthony Chan, chief economist for Chase Private Client in New York.
Rising home prices and recent gains in the stock market should blunt the impact of tax increases for consumers and spending should improve by the second half of the year, said Chan.
Homebuyers also have been enticed by historically low interest rates. The Federal Reserve's latest stimulus efforts are helping to keep rates low, as the central bank buys assets including mortgage-backed securities.
It was the 10th month in a row that prices have increased, the longest string of gains since before 2006. Last year's rise in prices beat a nine-month consecutive run in 2009 and 2010, when the market was boosted by a homebuyer tax credit.
A number of challenges remain for the housing market, including tight access to mortgages and on-going foreclosures.
Highlighting the hurdles on the path to recovery, separate government data showed the homeownership rate slipped to 65.4 percent in the fourth quarter from 65.5 percent.
Consumer attitudes dropped more than expected to 58.6 in January, data from The Conference Board showed. It was the lowest level since November 2011.
At the start of the year, US politicians came to an agreement that averted the so-called fiscal cliff of spending cuts and tax increases that had been set to come into effect.
But the deal did raise taxes for many Americans, while a payroll tax holiday came to an end. Lawmakers still face a number of budget decisions.
"Consumers are probably pretty unhappy to notice that their payroll taxes have gone up," said David Sloan, economist at 4Cast Ltd. in New York.
US stocks pared slight gains immediately after the report was released, but Wall Street was modestly higher by midday.
The Conference Board's consumer expectations index tumbled to its lowest level since October 2011 at 59.5, while the present situation measure slipped to 57.3.
Consumers' views on the labor market were also weaker, with the "jobs hard to get" index rising for the first time since September.
Economists said the pain should be short lived and that confidence was likely to perk back up as long as Washington can come to an agreement on the budget issues yet to be resolved.
"This might bounce back pretty quickly as people get used to a smaller paycheck. Right now, it's a sticker shock," said Craig Dismuke, chief economic strategist at Vining Sparks in Memphis, Tennessee.
Home prices on a non-adjusted basis slipped 0.1 percent. The non-adjusted numbers showed prices fell in about half of the cities covered by the survey, with the winter months typically a weak period for housing, the survey said.
Phoenix, which saw its housing market rebound sharply last year, led with the biggest yearly gain at 22.8 percent. New York was the only city to fall, down 1.2 percent from the previous year.


Oil rises on million barrels OPEC pledge

Updated 3 min 58 sec ago
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Oil rises on million barrels OPEC pledge

  • Oil prices rose almost 3 percent on Friday as OPEC agreed a modest increase in output to compensate for losses in production at a time of rising global demand.
  • The Organization of the Petroleum Exporting Countries agreed on Friday to boost output from July.

LONDON: Oil prices jumped yesterday afternoon as OPEC announced a more modest production increase than forecast.

The group said yesterday that it and its allies would from next month bring production back in line with levels originally agreed in late 2016, equivalent to an increase of around 1 million barrels.

But analysts have warned that the reaffirmed commitment — an effective production increase given that a number of producers have cut output more than agreed— would not be enough to lower prices, given further supply disruptions on the horizon.

OPEC Conference President and UAE Energy Minister Suhail Al-Mazrouei told reporters in Vienna that the target was a group-level commitment, and that individual production quotas for member states had not been set.

Adherence to the decision would be “challenging for those countries that are struggling with keeping their level of production,” he said, but he noted that other countries could pick up any shortfall.

“We will deal with it collectively,” he said, insisting that the group would not not exceed production agreements.

“It is difficult already to achieve that 100 percent,” he added. “No one intends to do anything beyond that.”

But Thomas Pugh, a commodities analyst with Capital Economics, said while OPEC currently had little spare capacity, production rebounds by key states might tempt members to over-produce.

“OPEC has found it difficult to police group quotas in the past so today’s decision runs the risk of production rising above its target,” he said.

“If production starts to rebound in Venezuela or Angola then the group may quickly exceed its quota.”

The lack of detail over individual commitments followed disagreements between Iran and Saudi Arabia about the level of increases ahead of the meeting, according to energy expert Cornelia Meyer.

“The ‘collective agreement’ to return to 100 percent compliance was in the end sufficiently fuzzy for them to get an agreement,” she told Arab News.

“But going forward the market is going to want to see more detail as to how it will be implemented — and by whom — before it impacts prices.”

Brent crude futures rose around 3 percent on the news, briefly exceeding $75 per barrel in early afternoon trading, with prices forecast to rise further in the short-term.

“The effective increase in output can easily be absorbed by the market and is not going to tip the oil balance into negative territory,” Harry Tchilinguirian, head of commodities strategy at BNP Paribas, told Reuters.

“I suspect the market will continue to grind higher, notably in view of oil inventories in the OECD being below the famous five-year average target and the ever present risk of supply outages in Venezuela and Libya.

The agreement is likely to do little to mollify those looking for higher output increases to ease pressure on prices, not least US President Donald Trump.

“Hope OPEC will increase output substantially. Need to keep prices down!” Trump tweeted yesterday, following the announcement of the agreement.

But Meyer noted that shifting macroeconomic trends — notably the prospect of growing trade wars between the US and trading partners like China and the EU — may see rising demand for oil slow or go into reverse.

“We’re out of the goldilocks scenario now,” she said.

“Both Saudi Arabia and Russia have talked up how much the market is short. From now on they may well have to talk it down in terms of that gap between supply and demand.”