WASHINGTON: Most areas in the United States that were particularly hard hit by the housing market’s meltdown are seeing large gains.
Phoenix, for example, posted the largest year-over-year price growth at 23 per cent, while New York had the lowest at 1.9 per cent.
Two cities saw record year-over-year price growth. In Atlanta, annual prices were up 16.5 per cent, the highest rate since 1992.
Signalling continued momentum, an index of home prices for 20 US cities posted the largest year-over-year growth in more than six years, according to a data.
In Dallas, annual prices were up 7.1 per cent, with these data going back to 2001.
The S&P/Case-Shiller 20-city composite index rose 0.3 per cent in February, before seasonal adjustment, and was up 9.3 per cent from the same period in the prior year, the largest annual growth since May 2006.
February’s monthly growth was the largest since August. After seasonal adjustments, prices rose 1.2 per cent in February.
All 20 cities saw year-over-year gains in February, with accelerating growth in 16 cities.
After the data’s release, Dean Baker, co-director of the Center for Economic and Policy Research, warned about local market bubbles.
“Many of the areas most affected by the housing bubble and subsequent crash are seeing extraordinary price increases,” Baker wrote in a research note. “The end of this round of speculation is not likely to be much prettier for the areas affected than the end of the last round.”
With ongoing low interest rates, increasing demand and constrained inventory have been supporting prices. The Federal Reserve is expected to keep its interest rate target at near-zero levels when it decides on rates on Wednesday.
Buyers’ expectations are also playing a role, according to economists at IHS Global Insight. “Some want-to-be home buyers are entering the market now instead of later because they are afraid that prices will shoot up if they wait. Their expectations, which become self-fulfilling, are magnifying price increases,” according to an IHS Global Insight note.
But despite recent gains, the 20-city composite index indicates that prices remain about 29 per cent below a 2006 peak.
While there have been recent signs of a pause in the housing market’s recovery, data show that residential investment continued to contribute to economic growth in the first quarter, a trend that economists expect to continue this year.
“Despite some recent mixed economic reports for March, housing continues to be one of the brighter spots in the economy,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.
The eurozone’s unemployment rate hit a record high of 12.1 per cent in March as the region continued to struggle with recession, government officials said.
The seasonally adjusted jobless rate for the 17-nation group topped the previous 12 per cent record reached in January and February, according to Eurostat, the region’s statistical office.
At the same time, inflation fell in April to an annualised rate of 1.2 per cent from 1.7 per cent the previous month, Eurostat said. The combination of rising unemployment and low inflation could lead the European Central Bank to cut interest rates further after it meets this week.
The March unemployment rate was the highest recorded since the European Union began tracking the rate in 2000 following the creation of the region’s single currency.
The rate was up sharply from a year earlier, when unemployment stood at 11 per cent, as debt struggles have pulled the eurozone back into recession. The unemployment rate was up year-over-year in 19 of the region’s countries. Spain had the highest unemployment rate in March at 26.7 per cent. Greece’s rate was 27.2 per cent in January, the latest figures available.
The eurozone’s lowest unemployment rates were in Austria (4.7 per cent), Germany (5.4 per cent) and Luxembourg (5.7 per cent).
A 0.4 per cent drop in energy prices in April helped bring inflation well below the European Central Bank’s target maximum of 2 per cent. The bank’s governing council is meeting this week and would announce any new monetary policy moves on Thursday.
The ECB’s main short-term interest rate is 0.75 per cent and could be cut further. The US Federal Reserve has kept its key short-term rate near zero since late 2008.