January 25, 2022

U.S. Home Prices Increased in July

The Standard Poor’s-Case-Shiller index shows home prices increased in July from June in 17 of the 20 cities tracked.

Over the last 12 months, prices fell in all but two cities — Detroit and Washington. Prices rose sharply in Minneapolis and Chicago. Prices in Las Vegas and Phoenix declined.

Housing is a major reason the economy has struggled more than two years after the recession officially ended. Home sales are on pace this year to be the worst since 1997.

Separately, a private research group said consumers’ confidence in the economy remained weak in September after dropping to a post-recession low in August as Americans continued to worry about high unemployment and low wages.

The Conference Board said its Consumer Confidence Index was at 45.4 points, up slightly from a revised 45.2 in August. Economists surveyed by FactSet had expected a reading of 46. The August reading, which was the lowest since April 2009, was almost 15 points below July’s reading of 59.2

A reading above 90 indicates the economy is on solid footing. Economists watch the number closely because consumer spending accounts for about 70 percent of American economic activity.

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Off the Charts: Up or Down, China Trade Surpluses Bear Watching

The countries that have benefited the most are the suppliers of major capital goods, particularly Germany, which have sold China rising amounts of machinery that can be used to produce manufactured goods, and the sellers of natural resources.

In addition, some Asian countries have prospered both as suppliers to China and as countries whose own, cheaper exports have replaced some more expensive Chinese products in other markets.

The accompanying charts show the changes in bilateral trade balances between China and 12 countries since 2007, the last full year before the United States and then most of the rest of the world went into recession. The charts are based on Chinese trade figures, including August statistics released this week.

Over the 12 months through August, China ran up a trade surplus in goods of almost $170 billion, about $10 billion less than in the previous 12 months and little more than half the record surplus, of $315 billion, reached during the 12 months through March 2009. Then, it was exporting $1.30 of goods for every dollar’s worth it imported. Now, the figure is down to $1.10.

Chinese trade figures provide some insights into the problems now being felt in the euro zone. Germany turned a $3.3 billion deficit in China trade in 2007 into a $12.7 billion surplus in the most recent 12 months, largely through the sales of capital equipment that helped China produce more products.

Some of those products replaced those that had been exported by countries like Italy. Over all, China’s trade surplus with members of the European Union other than Germany rose by $31 billion during the period, a little more than the $29 billion rise in China’s surplus with the United States.

For a time in 2009, China’s trade surplus with both the United States and Europe appeared to be declining. That now appears to have been a result of the plunge in world trade, which slowed both exports and imports. Once Western economies began to recover, even slowly, the appetite for Chinese imports increased.

Largely because of its appetite for natural resources, China imported $75 billion in products from Australia during the most recent 12 months, nearly three times the 2007 figure. But its sales to Australia did not even double, and a small Australian bilateral trade surplus of less than $8 billion in 2007 soared to more than $43 billion.

Among smaller countries, one of the sharpest turnarounds in Chinese trade came in Ireland. In 2007, China exported $4.4 billion in goods to Ireland, and bought just $1.9 billion in products. But after the collapse of its economy, Ireland bought just $2 billion in goods over the most recent 12 months for which data is available, while selling $3.5 billion in products to China.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

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U.S. Housing Sales and Prices Remain Weak

A separate report on Tuesday showed home prices in major American cities rose for the second straight month in May. But after adjusting for seasonal buyers, prices actually fell in a majority of markets.

The Commerce Department said sales of new homes fell 1 percent in June to an annual rate of 312,000. That’s less than half the 700,000 new-home sales that economists say is typical in healthy markets.

Sales fell to record lows in the Northeast and West. The median price of a new home rose to $235,200 in June, up 5.8 percent from May, according to the Commerce Department report.

Last year was the worst for new-home sales on records dating back a half century, but through the first six months of this year, sales are lagging behind last year’s totals.

In June, new-home sales fell to record lows in the Northeast and West. The median price of a new home rose to $235,200 in June because of the influx of spring buyers. The median price is not adjusted for seasonal factors.

The Standard Poor’s/Case-Shiller home-price index said May prices increased in 16 of the 20 cities tracked for an average of 1 percent. Over the past 12 months, prices have fallen in 19 of the 20 cities tracked.

Housing remains the weakest part of the American economy. High unemployment, larger down payment requirements and tougher lending standards are preventing many people from buying homes. And some potential buyers who can clear those hurdles are holding off, worried that home prices have yet to bottom out.

Last year was the fifth straight year that new-home sales fell. That followed five straight years of record-high sales, when the housing market was booming.

Still, all home sales are weak. Sales of previously occupied homes fell for a third straight month in June and are lagging last year’s sales of 4.91 million homes sold last year, the fewest since 1997. In a healthy economy, people buy roughly 6 million existing homes annually.

While new homes represent less than one-fifth of the total housing market, they have an outsize impact on the economy. Each new home creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.

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