The April 2010 S&P/Case Shiller Home Price Index of 20 cities rose 3.8 percent, slightly above expectations of a gain of 3.4 percent. The gain in the non seasonally adjusted index was the first since September 2009. However, it captures the last month of the federal homebuyer tax credit.
Seasonally adjusted, the month-over-month gain follows a drop in February and March. Eighteen cities posted month-to-month increases in April, but price levels remain close to April 2009 lows. Miami and New York were the only two cities to post monthly drops, dropping 0.8 percent and 0.3 percent, respectively. New York posted a new relative index low. San Diego has now shown 12 consecutive months of positive returns. It is the only market that did not contract in the late winter months.
On a year-over-year basis, of the 20 cities surveyed, 11 had gains, led by San Francisco and San Diego. Las Vegas again led the declines, followed by Detroit. Phoenix saw a year-over-year gain of 5.4 percent, while Miami fell by .5 percent.
With the expiration of the homebuyer tax credit and no further government stimulus on the horizon, the housing industry will be left to its own natural supply/demand dynamic. How the housing market reacts will have much to say about the overall economic conditions, including consumer spending and even the status of banks, which have likely priced in a housing recovery in the mortgage-backed securities still on their books.
For more on the Home Price Index, please click on the “Housing Statistics” page either on the menu bar on in the list in the left-side column.
Gregg D. Killoren
victoria1014
Politicians Exacerbate Market Uncertainty
Whether it is the government debt crisis in Europe, proposed taxes on financial institutions or financial regulatory reform, politicians now have more effect, which has been generally negative, on equity markets than earnings and employment. Markets have been running around in circles lately in large part due to the fact that politicians around the world do not seem to know what they are doing, but they act anyway. The economic uncertainty brought on by the buffoonery of politicians is what markets fear most. A study recently published at Voxeu.com highlights, using the European sovereign debt crisis, how politicians can turn a crisis into a panic.
Jacopo Carmassi, Researcher at Assonime and Fellow of the Wharton Financial Institutions Center, and Stefan Micossi, Director General of Assonime, have authored a study that tracks policy announcements from the start of the Eurozone crisis in December 2009, arguing that governments may have contributed to turmoil with their public display of confusion—ultimately undermining credibility. While acknowledging the seriousness of the sovereign debt crisis in the European Union, the authors assert that politicians statements and self-serving interests added fuel to the fire, causing financial markets to dramatically increase the cost of insuring debt of nations like Greece. That, in turn, nearly shut off credit to banks and businesses in Europe as the cost of overnight lending spiked. Carmassi and Micossi note that the political bickering created “the impression that domestic political interests would take precedence over orderly management of the Greek debt crisis,” and the political leaders “raised broader doubts on their ability to address fundamental economic divergences within the area, which are the real source of debt sustainability problems in the medium term.”
The authors point out that, once European leaders began to act in concert, first by establishing a $1 trillion bailout fund for sovereign debt, and most recently, by voting to disclose the results of European bank stress tests in July, market pressures eased. “If Eurozone governments continue to show unity of purpose, and that they seriously intend to address underlying imbalances threatening the sustainability of the euro, there is hope that financial markets will relent and accept that the Eurozone is not about to crumble,” the authors conclude.
To read the full study, please click on the following link to Voxeu.org: How politicans excited financial markets’ attack on the Eurozone.
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Posted in Banking, Central Banks, Economy, European Union, Market Commentary
Tagged European Union, Market Commentary, sovereign debt