U.S. Home Prices Fall Amid Brutal Winter Cold

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Home prices
Gene J. Puskar/AP
By CHRISTOPHER S. RUGABER

WASHINGTON -- U.S. home prices fell for the second straight month in December as brutally cold weather, tight supply and higher costs slowed sales.

The Standard & Poor's/Case-Shiller 20-city home price index declined 0.1 percent from November to December, matching the previous month's decline. The index isn't adjusted for seasonal variations, so the dip partly reflects slower buying as winter weather set in.

For all of 2013, however, prices rose by a healthy 13.4 percent, mostly because of big gains earlier in the year. That was the largest gain in eight years. Yet that increase may be putting some homes out of reach for many buyers.

The Case-Shiller index covers roughly half of U.S. homes. The index measures prices compared with those in January 2000 and creates a three-month moving average. The December figures are the latest available.

"Gains are slowing ... and the strongest part of the recovery in home values may be over," said David Blitzer, chairman of the S&P's index committee. "Higher home prices and mortgage rates are taking a toll on affordability."

Even some cities in warmer areas saw declines. %VIRTUAL-article-sponsoredlinks%Home prices in Phoenix fell 0.3 percent, the first drop after 26 months of big increases.

Only six cities recorded higher prices in December: Dallas; Las Vegas; Miami; San Francisco; Tampa, Fla.; and Washington, D.C. Home prices in all 20 cities rose compared with a year ago.

The housing market has weakened in recent months after a healthy recovery in 2013.

Sales of existing homes plunged in January to the slowest pace in 18 months. And builders broke ground on 16 percent fewer homes in January compared with December, the Commerce Department said this week. That was the second straight decline.

Builders also requested fewer permits in January for the third straight month, suggesting construction remained weak this month.

The declines came after existing home sales reached 5.1 million in 2013, the best showing in seven years. And builders started work on 976,000 houses and apartments last year, the most in six years.

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U.S. Home Prices Fall Amid Brutal Winter Cold
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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