December 1, 2023

Existing-Home Sales Hit a 3-Year High

The National Association of Realtors said on Wednesday that existing-home sales had advanced 0.6 percent to an annual rate of 4.97 million units, the highest level since November 2009. The data underscored the housing market’s improving fortunes as it starts to regain its footing. Resales were 9.7 percent higher than in the same period last year.

“It’s quite supportive of the overall economy,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch in New York. “It’s a cushion against some of the other concerns in the economy.”

Tight supplies in some parts of the country have constrained the pace of home sales, but sellers are starting to wade back into the market, attracted by rising prices.

In April, the median home sales price increased 11 percent from a year ago to $192,800, the highest level since August 2008. It was the fifth consecutive month of double-digit gains.

With prices rising, more sellers put their properties on the market. The inventory of homes on the market rose 11.9 percent from March to 2.16 million.

Adding to signs that the housing recovery was becoming firmly established, distressed properties, which can weigh on prices because they typically sell at deep discounts, accounted for only 18 percent of sales last month.

That was the lowest since the real estate association started monitoring them in October 2008. Those properties — foreclosures and short sales — made up 21 percent of sales in March.

In another bright sign, properties were selling more quickly. The median time on the market for homes was 46 days in April, down from 62 days the previous month.

About 44 percent of all homes sold in April had been on the market for less than a month, while only 8 percent had been on the market for a year or longer.

Sales were up in three of the four regions, falling 3.4 percent in the Midwest.

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Third-Quarter G.D.P. Growth Is Revised Up to 2.7%

The economy grew at a substantially faster pace in the third quarter than first thought, powered by increases in business inventories and federal spending.

After initially saying output increased at an annual rate of 2 percent, the Commerce Department on Thursday revised its estimate to show growth at a 2.7 percent rate in the three months that ended Sept. 30.

While businesses have remained cautious amid fiscal uncertainty in Washington and weak growth overseas, consumer spending in the United States has moved along in recent months at a healthier pace.

In addition, a strengthening housing market in many regions, along with better employment figures, has reassured some analysts who feared the economy was close to stalling.

However, worries remain about growth in the current quarter, with many economists estimating output to increase at a more tepid annual rate of roughly 1 percent.

And with more than $600 billion in tax increases and spending cuts looming if Congress and the White House can’t agree on a deal to cut the deficit by Jan. 1, economists warn the economy remains vulnerable.

The newly estimated pace of growth represents a substantial increase in the level of expansion from the second quarter, when the economy grew at a rate of just 1.3 percent. It also marks the fastest rate of expansion since the fourth quarter of 2011, when the economy grew at a 4.1 percent annual pace.

This was the second of the government’s three estimates of quarterly growth. The final figure is scheduled for Dec. 20.

“The economy certainly hasn’t taken off, but it’s nowhere close to a stall,” said David Kelly, chief global strategist for JPMorgan Funds. “The economy is still underperforming its full potential, but once we get past the ‘fiscal cliff’ uncertainty, we could see stronger growth next year.”

He cautioned that the inventory buildup in the third quarter might cool growth in the fourth quarter.   “If you’re building inventory in the third quarter, then you don’t need to build it in the next quarter,” Mr. Kelly said.

In a separate report, the Labor Department said the number of people filing first-time claims for unemployment dropped by 23,000 to a seasonally adjusted level of 393,000 last week. Economists had been expecting the number to total 390,000.

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Off the Charts: Oil Supply Is Rising, but Demand Keeps Pace and Then Some

Well, standards of living are improving in developing countries, but the dire forecasts now appear to be wrong. In part that is because new discoveries and improving technologies have increased the amount of oil that can be produced. It also reflects conservation, in part, as cars become more efficient and as other steps are taken to reduce oil use.

The International Energy Agency, in its 2012 World Energy Outlook, released last week, forecast that American oil production, which began to rise in 2009 after decades of decline, would continue rising through at least 2020, when it could be about as high as it was in 1970, the year of peak production.

At the same time it forecast that by 2035, American oil consumption, which peaked in 2005, could decline to levels not seen since the 1960s, depending on how much conservation is encouraged.

The I.E.A. report also forecast that by around 2020, the United States could surpass Saudi Arabia as the world’s largest oil producer, and that while the country was not likely to become a net exporter of oil, the North American continent as a whole could be by around 2030.

But despite declining demand in some countries that historically were heavy users of oil, the world demand for oil seems likely to continue to rise. The I.E.A. forecast that global energy demand — including demand for energy produced by other sources — is likely to rise by 35 percent by 2035, with a large part of the increase coming from China and India.

In 1969, the United States consumed a third of the oil used in the world, while China used less than 1 percent. Last year the United States’ share was less than 22 percent, while the Chinese accounted for 11 percent. The I.E.A. forecasts that by 2030, the American share could be less than the Chinese one.

By 2035, American consumption of oil is expected to be as much as one-third less than it was last year. In China, oil consumption is expected to be up as much as two-thirds from the 2011 level, and India’s is predicted to more than double.

The accompanying charts show trends in oil consumption in the United States, Japan, China and India, as well as in the other major economies — defined as the 32 countries other than Japan and the United States that are in the Organization for Economic Cooperation and Development. In each chart, the oil consumption in 2011 is shown as 100 percent, and the amount of oil used in that year is shown.

For each area, two forecasts are shown. One is based on the assumption that current policies will continue. The other, labeled “new policies” by the I.E.A., assumes that countries will gradually keep promises they have made to encourage conservation — promises that in the United States include increasing fuel economy in cars and trucks and at least a small increase in the use of natural gas to fuel trucks. The I.E.A. says that if those promises are kept, oil prices in real terms are likely to be only a little higher than they are now; if current policies continue, the price is likely to rise more rapidly.

Floyd Norris comments on finance and the economy at

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Letters: Letters: Quickening the Pace of Economic Recovery

Opinion »

Letters: The Role of the Military

Readers respond to an Op-Ed about the unquestioning support of the military-industrial complex and its spending.

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China Raises Interest Rates

HONG KONG — China on Wednesday raised interest rates for the fifth time in nine months, the latest in a series of moves aimed at cooling the pace of economic growth and the steep price rises that have accompanied expansion.

The central bank announced that it was raising the key lending and deposit rates in the world’s second-largest economy, after the United States, by a quarter of a percentage point. The increase had been widely expected by analysts.

The central bank said the one-year deposit rate would rise to 3.5 percent, from 3.25 percent, beginning Thursday. The one-year lending rate was raised to 6.56 percent, from 6.31 percent.

Signs that inflation in China has accelerated to levels well above what the Chinese authorities are comfortable with have mounted in recent months and prompted Beijing to step up its efforts at reining in the ample lending that fueled growth and helped fan sharp rises in property prices as well as overall inflation.

Data released last month showed that consumer prices in May had risen 5.5 percent from the same period last year, and economists widely believe that data for June, due next week, will show an even more marked increase, of 6 percent or more.

The rate announcement came just weeks after news of the latest in a long line of instructions by Beijing to the nation’s banks to extend fewer loans — the 12th such move since early 2010.

Beijing’s gradual cutback of lending — by raising reserve-requirement ratios for banks, which reduces the amount of money available for loans — has had the desired effect of moderating the sizzling pace of growth to a level that most economists here believe points to a soft landing for the Chinese economy.

However, many forecasters also believe that Beijing now has little room left to increase reserve-requirement ratios much further or to lift interest rates much more. Another small rate increase may come later in the year, but over all, the current round of tightening may soon have run its course, many believe.

The price rises that have accompanied soaring growth, meanwhile, have so far shown little sign of abating — in part because of sharp increases globally in the costs of raw materials. Natural disasters in China also have helped push up the cost of food.

Inflation levels could ebb somewhat later this year, but are widely expected to remain elevated, presenting Beijing with a headache. The Chinese authorities are intensely aware that soaring household bills could lead to widespread public dissatisfaction.

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Employers Added 179,000 Jobs in April, ADP Says

Private employers in the United States added 179,000 jobs in April, while the pace of growth in the services sector unexpectedly eased in April to its lowest level since August 2010, according to economic reports released on Wednesday.

In the jobs report, the ADP Employer Services report fell short of economists’ expectations for a gain of 198,000, according to a Reuters survey. March private payrolls were revised up to an increase of 207,000 from a previously reported 201,000.

The figures come ahead of the government’s much more comprehensive labor market report on Friday, which includes both public and private sector employment.

“Certainly people will look into this and be pessimistic or cautious about Friday’s numbers,” said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, N.Y.

“The breakdown from the release did show some strength in small and medium businesses. The weakness was actually in large businesses, and that is unusual. But certainly optimistic for a broader strengthening in employment.”

Friday’s report is expected to show a rise in overall nonfarm payrolls of 186,000 in April, based on a Reuters poll of analysts, and a gain of 200,000 in private payrolls.

Economists often refer to the ADP report to fine-tune their expectations for the payrolls numbers, though it is not always accurate in predicting the outcome. The report is jointly developed with Macroeconomic Advisers.

In other report, the Institute for Supply Management said its services index fell to 52.8 last month, from 57.3 in March. That was well below economists’ forecasts for 57.4, according to a Reuters survey.

A reading above 50 indicates expansion in the sector.

The report’s new-orders index tumbled to its lowest level since December 2009, falling to 52.7, from 64.1. The employment gauge dipped to 51.9, from 53.7.

“It’s a weak indication not only in the headline figure, but also in the worst possible place: the orders component,” said Pierre Ellis, senior economist at Decision Economics. “This is a sector that is supposed to be relatively smooth in terms of growth so if it turns out to be more than transitory, this would be a clear indication of destabilization in the economy.”

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Bucks: Maybe a Home Really Is a Good Investment

Carl Richards

Carl Richards is a certified financial planner in Park City, Utah. His sketches are archived here on the Bucks blog and on his personal Web site,

You often hear people in their 60s, 70s and even 80s say that the house they lived in for 30 years was the best investment they ever made. Given what we recently went through in the housing market that can be hard to believe. But they’re probably right; it’s just not for the reason you think.

For the last 120 years, housing prices barely kept pace with inflation. The last 30 years haven’t been any better, once you include the ugly numbers from the last five or six years. So how could an asset that barely kept pace with inflation be the best investment someone ever made?

Let’s start with how we used to look at houses. After World War II, the United States saw a huge increase in home ownership. From 1940 to 1960 home ownership increased from 43 percent to 62 percent of Americans.

You know these people. For some of you, they were your parents, and for others, they were your grandparents. You went there for Thanksgiving and other holidays. These houses were homes, not investments. Nobody thought about what they were worth every day, month or even decade. You just lived there.

But no more. It’s almost gotten to the point where I expect to see a quote for my home on Yahoo Finance every morning. The Web site Zillow has come pretty close to being able to provide that.

A few years ago, investing in real estate, including the house you lived in, became America’s favorite spectator sport, with most of us either joining in or wishing we could. If you look again at the chart of home values over the years that I linked to above, it looks just as scary and volatile as the stock market.

But in the past no one knew they were supposed to be scared while they lived in their house. The only time you cared about the real estate market, such as it was, was when you needed to move.

So part of the reason people who lived in the same house for 30 years claim their home was their best investment comes from it probably being the only investment they actually  held for 30 years. The power of compound interest, even if the return is just over inflation, is amazing, but only if you actually let it compound.

For comparison, look at stock mutual funds, which are meant to be held for a long time but often are not. According to the research firm Dalbar, the average investor holds on to their mutual fund for just over three years.

Three years versus 30 years may go a long way to explaining why people may say that their home has been their best investment. It’s not because real estate has delivered a fantastic return; it’s simply because of the decision they made to sit tight in that four-bedroom asset.

So in the end this consideration of the best investment isn’t about the relative merits of real estate. It’s about behavior. The question to ask yourself, then, is this: 30 years from now, what will be your best investment?

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U.S. Housing Construction Rose 7.2% in March

Builders broke ground last month on the most new homes in six months, giving the weak housing market a slight lift.

The Commerce Department said on Tuesday that home construction rose 7.2 percent in March from February to a seasonally adjusted 549,000 units a year. Building permits, an indicator of future construction, rose 11.2 percent after hitting a five-decade low in February.

Still, the building pace is far below the 1.2 million units a year that economists consider healthy. And March’s improvement came after construction fell in February to its second-lowest level on records dating back more than a half-century.

Millions of foreclosures have forced home prices down. In some cities, prices are half of what they were before the housing market collapsed in 2006 and 2007. And more foreclosures are expected this year. Tight credit has made mortgage loans difficult to get, and many would-be buyers who could qualify for loans are reluctant to shop, fearing that prices will fall even further.

A sign of the battered industry is the number of new homes finished and ready to sell dropped in March to a seasonally adjusted 509,000 units, the lowest level on records dating back to 1968. And the number of homes now under construction has fallen to a four-decade low.

Single-family homes, which make up roughly 80 percent of home construction, rose 7.7 percent in March. Apartment and condominium construction rose 14.7 percent. Building permits increased to the highest level since December, spurred by a more than 28 percent jump in permits granted for apartment and condo buildings.

The increase in home construction activity was felt in most regions of the country. It rose 32.3 percent in the Midwest, 27.6 percent in the West and 5.4 percent in the Northeast. Construction fell 3.3 percent in the South.

The National Association of Home Builders, the trade group, said Monday that its index of industry sentiment for April fell one notch, to 16. That followed a one-point increase in March and four months of 16 readings. Any reading below 50 indicates negative sentiment about the housing market’s future; the index has not been above that level since April 2006.

Most economists expect home prices — and by extension home sales and construction — to slip even further in 2011 before a modest recovery takes hold.

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Economix: A Long, Slow Slog Back to Normal

While the 216,000 net jobs that the economy added last month were certainly welcome, the growth wasn’t nearly fast enough to get the country back on the path to full employment anytime soon.

The Great Recession dug the country’s job market into a very deep hole. As I mentioned in an earlier post, the economy today still has 5.3 percent fewer nonfarm payroll jobs than it had when the recession began in December 2007. If payroll growth continues apace with the gains experienced in March, it will take nearly three years for the economy to recover the jobs lost during the recession.

The chart below shows what this long, slow slog would look like. (The Brookings Institution put together a similar chart a few months back.)

The solid blue line shows the change in employment since the recession started over three years ago. As you can see, the line stops in March 2011, which is the most recent employment data point we have. The dashed blue line shows what employment would look like if the economy added exactly 216,000 jobs each month:

DESCRIPTIONSource: Bureau of Labor Statistics

As you can see, the dashed blue line finally reaches the level of prerecession employment in January 2014 — nearly three years from now.

The dashed green line is one alternative, if unlikely, trend. It shows what job growth would look like if, from here on out, the economy had monthly job growth as strong as it was during the best month of the 2000s — 472,000, the number of jobs added on net in March 2000. Even at that (very optimistic) pace, payrolls would not recover the ground lost during the recession until July 2012.

Even more depressingly, none of this takes into account the fact that the number of working-age Americans has been growing in the last few years, which means that if the economy were healthy it would have more jobs today than it had at the beginning of the recession.

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