Home Prices Rise in February Despite Weaker Sales

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Home Prices Rise in February Despite Weaker Sales
Tony Dejak/AP
By CHRISTOPHER S. RUGABER

WASHINGTON -- U.S. home prices rose in February from a year earlier at a solid pace, suggesting that a tight supply of available homes is boosting prices despite slowing sales.

Real estate data provider CoreLogic (CLGX) said Tuesday that prices for existing homes rose 12.2 percent in February from a year ago. That was up slightly from January's year-over-year pace of 12 percent.

On a month-to-month basis, prices in February rose 0.8 percent from January. But CoreLogic's month-to-month prices aren't adjusted for seasonal patterns, such as winter weather, which can depress sales.

Snowstorms, rising prices and higher mortgage rates combined to reduce home sales in February to their lowest level in 19 months.

A tight supply is helping boost prices even as sales slow. Sales fell 0.4 percent to a seasonally adjusted annual rate of 4.6 million in February from January, the National Association of Realtors said last month. That sales pace would exhaust the number of available homes in 5.2 months, the group said -- below the six-month supply typically available in healthy markets.

The states with the biggest price gains in the past year were: California, where prices rose 19.8 percent, followed by Nevada, 18.5 percent, and Georgia, 14.2 percent. %VIRTUAL-article-sponsoredlinks%No states posted a drop in home prices.

Prices in four states reached a record high in February: Colorado, Nebraska, North Dakota and Texas. An additional 22 states are within 10 percent of their previous peaks, CoreLogic said.

Nationwide, average home prices remain 16.9 percent below the peak reached in April 2006, at the height of the housing bubble.

Home sales and construction faltered over the winter, partly because harsh weather discouraged some Americans from venturing out to house-hunt. In addition, the average rate on a 30-year mortgage is about a percentage point more than it was last spring. That means buying costs are up.

Most economists think the housing recovery could pick up once the spring buying season begins, though likely at a slower pace than last year.

But some recent reports haven't been encouraging. A measure of signed contracts fell for the eighth straight month in February. That suggests sales will remain slow in coming months. Signed contracts usually lead to a finished sale in one to two months.

And home construction fell for a third straight month in February. But there was one hopeful sign: Developers applied for the most building permits in four months.

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Home Prices Rise in February Despite Weaker Sales
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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