Introduction by Hugh G. Pike

Hugh G. Pike

This is a recent article from the Wall Street Journal. These statistics indicate a recovery is taking place. While we need to see a continued, stable increase in these numbers, we are on the right path! Look for more positive news in the coming weeks!

 
By ROBBIE WHELAN

Sales of previously owned homes rose in December for the third straight month, bringing the supply of homes listed for sale to the lowest level since 2006 and offering a glimmer of hope that the housing market could be starting to climb out of a profound downturn.

Existing-home sales increased 5% in December from a month earlier, to a seasonally adjusted annual rate of 4.61 million units, the National Association of Realtors said Friday. Lawrence Yun, the Realtors’ chief economist, called the December gain “a good finish to a very tough year.”

Many economists had predicted that 2011 would be the worst year on record for existing home sales, but the year ended with 4.26 million sales, about 1.6% higher than the 4.19 million existing homes sold in 2010. Market-watchers attributed this to a minor surge in sales at year-end, driven by historically low mortgage rates, falling prices, active investor-buyers and increasing consumer confidence.

Still, economists cautioned that it’s too early to assume that the market is recovering. “These were positive numbers, but that doesn’t mean the market is getting better. Lenders have been trying to get rid of distressed homes, and investors been snapping them up,” said Patrick Newport, chief economist at IHS Global Insight. According to the Realtors report, investors purchased 21% of all homes in December, up from 19% in November.
Brendan Conway has the morning’s economic news that will impact markets on Tuesday, including Germany’s confidence report, Jeffries and General Mills earnings reports, and new housing data. AP Photo/Gene J. Puskar
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The inventory of homes for sale declined in December to 2.38 million, the equivalent of a 6.2-month supply, assuming the pace of sales remain at December’s level. A six-month supply of homes typically is considered healthy, although NAR’s numbers don’t take into account the “shadow inventory” of homes that are either in foreclosure or on bank balance sheets and not yet listed for sale.

Prices, meanwhile, continue to fall. The median price in December was $164,500, down 2.5% from a year earlier. Prices were down in all regions except the West, where prices rose slightly, compared with a year ago. For all of 2011, the median was $166,100, the lowest since 2002.

“What you really want to see is sales going up, inventories going down, and prices going up, not down,” said David Semmens, an economist with Standard Chartered. “People still feel they can hold off buying a house because the recovery won’t be that aggressive. It’s still very much a buyer’s market.”

That buyer’s market allowed Andrew Gonzales, a 24-year-old police officer in Santa Fe, N.M., to be picky about price when looking for a home for himself and his three-year-old daughter. He closed last month on a $132,000, three-bedroom home in Rio Rancho, a suburb of Albuquerque, after the price was cut twice. Just before closing, the home was appraised for $18,000 higher than the sales price, at $150,000, by a private appraiser.

“I got tired of paying rent, and I’m a single father, so I wanted a home for my daughter,” he said. “I was just waiting for the price to come down.”

Vision Equity, a company that buys foreclosed homes at auctions in Indianapolis, stepped up the volume of its purchases this winter, buying about 45 homes a month in October, November and December, compared with about 30 homes a month last summer.

“There’s a lot of cash investor activity right now,” said Steve Olson, a spokesman for Vision Equity. “The chatter at the courthouse was, there’s going to be a lot more product coming on the market, and the pricing is going to be good for investors. And we prepared our own investors for that.”

18 January 2011

Inflation is one of the most important issues in economics.

It influences the interest rate we get on our savings and the rate we pay on our mortgages.

Inflation also affects the level of state pensions and benefits, as well as the price of some train tickets.

What is inflation?

Inflation is the rate of change of prices for goods and services.

There are a number of different measures of inflation in use. The most frequently quoted and most significant ones are the Consumer Prices Index (CPI) and the Retail Prices Index (RPI).

Each looks at the prices of hundreds of things we commonly spend money on, including bread, cinema tickets and pints of beer – and tracks how these prices have changed over time.

One of the key differences between the two main indexes is that RPI includes housing costs such as mortgage interest payments and council tax, whereas CPI does not.

The inflation rates are expressed as percentages. If CPI is 3%, this means that on average, the price of products and services we buy is 3% higher than a year earlier.

Or, in other words, we would need to spend 3% more to buy the same things we bought 12 months ago.

Why is it important?

Researchers track the prices of thousands of items we regularly put in our shopping baskets
The data from the CPI and RPI rates are used in many ways by the government and businesses, and play an important role in setting economic policy.

That’s because the Bank of England uses it to set interest rates. If the Bank’s Monetary Policy Committee thinks inflation will be above 2% in the next 18 months or so, it may increase interest rates to try to subdue it.

Conversely if it thinks inflation is likely to be below 2%, it may cut interest rates.

That’s why inflation is a crucial factor in determining the rates banks charge for mortgages and the rates they offer on savings accounts.

It also has a direct impact on some people’s incomes.

Anything that is described as index-linked rises in line with inflation.

That includes state benefits, pensions and – in part – some train tickets.

Some companies use the level of inflation to set annual pay rises. Recently, however, due to the effects of the recession, many pay settlements have fallen behind price rises.

How is inflation calculated?

Every month the Office for National Statistics (ONS) collects 120,000 prices of goods and services from a wide range of retailers across the country – including online retailers.

Prices are updated every month and price collectors visit the same retailers each time in order to monitor identical goods and make sure they are comparing like with like.

All these prices are combined using information on average household spending patterns to produce an overall prices index.

It also takes into account how much we spend on different items.

So items are weighted – i.e. given more importance in the inflation indexes – according to how much we spend on them.

We typically spend more on fuel than on postage stamps, for example.

So a large rise in the price of petrol and diesel would affect the overall rate of inflation more, as it has a weight of 4% in the RPI.

Meanwhile a rise in the price of stamps is less likely to affect the overall index, as they have a weighting of 0.1%

Hugh G. Pike

Introduction by Hugh Pike

We’ve been talking about inflation for some time. While, overall, inflation is a terrible thing, it can play well, into your hand, as a real estate investor. Stay tuned, more to come.

13 September 2011
The UK government’s targeted rate of inflation rose in August, following higher prices for clothing and footwear, petrol and energy.

The rate of Consumer Prices Index (CPI) inflation rose to 4.5% from 4.4% in July, according to figures from the Office for National Statistics (ONS).

The Retail Prices Index (RPI) measure increased to 5.2% from 5%.

The Bank of England’s target rate for CPI is 2%, and it expects inflation to return to target in the next two years.

The Bank argues that inflation is above target primarily because of the rise in VAT to 20% at the start of this year and past increases in global energy prices.

Separate figures from the ONS showed that the UK’s trade deficit in goods and services was £4.45bn in August, unchanged from July.

The deficit on trade in goods was £8.92bn, while the surplus on services was £4.47bn.

Computer games

The ONS said clothing and footwear had provided the biggest uplift to prices, with the 3.7% monthly increase a record between July and August.

Downward pressure from transport services, particularly the cost of flying, helped to offset some of these price rises.

Air fares rose by 11% on the month, but this was less than the record 16% rise seen a year earlier.

Recreation, particularly computer games and games consoles, saw prices fall between July and August.

Interest rates

Many analysts think the rate of CPI inflation may rise further, possibly touching 5%, before falling back towards the end of the year or at the beginning of next year.

“The rate is likely to move higher in coming months as utility bills continue to increase, putting further pressure on already-strained household budgets,” said Chris Williamson, chief economist at Markit.
AdvertisementThe BBC’s Alison Moss talks to pensioner Pat Shepherd about her inflation fears
“However, inflation should start to fall by the end of the year, and drop significantly next year as those factors which have driven the rate up this year, such as January’s hike in VAT from 17.5% to 20%, high oil and food prices and the depreciation of sterling all move into reverse.”

Jonathan Loynes at Capital Economics said: “August’s consumer prices figures brought further hope that the peak in inflation is close.

“We still expect inflation to be well below its 2% target at the end of next year.”

The price comparison website, Moneyfacts, said it was all but impossible for savers to maintain the value of their money.

Its spokesperson, Sylvia Waycot, said: “Over the last year the number of savings accounts that beat inflation for basic rate taxpayers has dropped successively from 91 to a measly five today.”

Earlier this summer, three of the nine members of the Bank’s Monetary Policy Committee were voting to increase interest rates in order to combat rising prices.

However, weaker economic growth in the UK and concerns about the strength of the global economic recovery meant that all nine members voted for rates to stay at a record low of 0.5% last month. Any increase in rates is seen by many as too risky given the fragile state of the economy.