Archive for June, 2013

June 2, 2013

Consumer Spending Declines

Consumer spending dropped a seasonally adjusted 0.2 percent in April, the Commerce Department said on Friday. That was the first decline since May 2012. It followed a 0.1 percent increase in March and a 0.8 percent jump in February.

A drop in gasoline prices most likely lowered overall spending. Adjusted for inflation, spending ticked up 0.1 percent in April. Still, that was the smallest gain since October.

Consumers also seemed to spend less to heat their homes in April, which may have reduced spending on utilities. April’s weather was mild after an unusually cold March.

Income was unchanged in April, after a 0.3 percent rise in March and 1.2 percent gain in February. Wages and salaries barely grew, while government benefit payments fell.

In the euro zone, unemployment continued its relentless march higher in April, according to official data published Friday, hitting yet another record.

The jobless rate for the 17 countries that use the common currency rose to 12.2 percent, from 12.1 percent a month earlier, with 19.4 million people out of work, according to Eurostat, the European Union statistics agency. Some analysts said the number of people without jobs could hit 20 million by the end of the year.

Separate data from Eurostat showed that inflation in the euro zone rose to 1.4 percent from 1.2 percent.

Most analysts do not expect the European Central Bank to cut interest rates or take other action to stimulate growth when its policy-making council meets in the coming week, but the inflation rate could prompt the central bank to wait for clearer signs that there is no risk of higher prices.

In the United States, the retrenchment in spending indicates consumers may be starting to feel the effect of higher taxes.

But a separate report Friday showed that consumer confidence rose to a six-year high in May, suggesting the decline in spending may be temporary.

Americans are taking home less pay this year because of a two-percentage-point increase in Social Security taxes. A person earning $50,000 a year has about $1,000 less to spend this year. Income taxes on the wealthiest Americans also increased.

Consumer spending drives 70 percent of economic activity. It grew at the fastest pace in more than two years from January through March, helping the economy expand at a 2.4 annual rate during that quarter.

Economists said the latest spending figures suggested that growth might be slowing in the April-June quarter, to around a 2 percent rate. But most still expect growth to improve slightly after that as the effect of tax increases and government spending cuts fades.

Paul Ashworth, chief North American economist at Capital Economics, called it “a sobering report” for people expecting stronger growth. “There will be some modest pickup in the second half of the year, as the fiscal drag starts to ease, but we expect the improvement to be very gradual rather than dramatic.”

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June 2, 2013

IMAX theatre in your home

It’s a costly endeavor, but if you have between $1-$2 million to spend, IMAX will come to your not-so-humble abode and build you your very own private home theater featuring the latest and greatest of the popular imaging technology.

No stone or inch will be left unturned because the company will factor in everything from the room’s geometry, seat placement, acoustics, 7.1 surround sound — basically, all the pieces that complement the giant floor-to-ceiling screen. Oh, and even if your dream mansion hasn’t been built just yet, IMAX will also work with architects and developers to make it happen.

To sweeten the deal, it will also one-up the technology movie goers are used to at public theaters by installing dual projectors with 4K resolution, one that does 2D and the other 3D. The added bonus is the projectors can display on a monstrous screen 120-feet wide, rather than the typical 71-foot size. Not to worry though, local theaters will be scooping this up this year, so the rich and famous won’t have the luxury of early adoption for too long.

And if all that wasn’t enough, IMAX will keep a full commitment to maintaining the technology by offering 24/7 support and constantly monitoring the setup to make sure it’s running as promised.

When IMAX says this is available to “a select few”, it didn’t confirm whether that meant a limited number of installs it could handle, or just those who could afford it and had the space to fit it all in.

June 2, 2013

Rising home prices denting short sales

RealtyTrac

Q1 foreclosure-related sales down 22 percent from a year ago

Rising home prices in many markets may be giving underwater homeowners the determination to stick it out in the hopes of being able to eventually sell at a profit, stunting the continued growth of short sales, data aggregator RealtyTrac reported today.

Foreclosure-related sales — sales of homes at some stage in the foreclosure process or already repossessed by lenders — were down 18 percent from the fourth quarter of 2012 to the first quarter of 2013, to 190,121. That’s a 22 percent decline from a year ago.

“We expected foreclosure-related sales to be lower given the downward trend in new foreclosure activity nationwide over the past two and a half years, but the decrease in nonforeclosure short sales was a bit of surprise given the 11 million homeowners nationwide still underwater,” said RealtyTrac Vice President Daren Blomquist in a statement.

Rising home prices can reduce the incentive for lenders to sign off on short sales, RealtyTrac noted. A failed short sale may no longer translate into bigger losses down the road, because average prices of real estate owned (REO) homes are rising. In many markets, REO prices are rising at a faster pace than nondistressed home prices, RealtyTrac said.

Markets with the biggest annual increases in the average price of foreclosure-related sales included San Jose, Calif., (up 30 percent); Dayton, Ohio, (up 27 percent); Phoenix (up 26 percent); Las Vegas (up 23 percent); and Sacramento, Calif., (up 21 percent).

June 2, 2013

U.S. Women on the rise as Family Breadwinner

Women are not only more likely to be the primary caregivers in a family. Increasingly, they are primary breadwinners, too.

Four in 10 American households with children under age 18 now include a mother who is either the sole or primary earner for her family, according to a Pew Research Center analysis of Census and polling data released Wednesday. This share, the highest on record, has quadrupled since 1960.

The shift reflects evolving family dynamics.

For one, it has become more acceptable and expected for married women to join the work force. It is also more common for single women to raise children on their own. Most of the mothers who are chief breadwinners for their families — nearly two-thirds — are single parents.

The recession may have played a role in pushing women into primary earning roles, as men are disproportionately employed in industries like construction and manufacturing that bore the brunt of the layoffs during the downturn. Women, though, have benefited from a smaller share of the job gains during the recovery; the public sector, which employs a large number of women, is still laying off workers.

 

Women’s attitudes toward working have also changed. In 2007, before the recession officially began, 20 percent of mothers told Pew that their ideal situation would be to work full time rather than part time or not at all. The share had risen to 32 percent by the end of 2012.

The public is still divided about whether it is a good thing for mothers to work. About half of Americans say that children are better off if their mother is at home and doesn’t have a job. Just 8 percent say the same about a father. Even so, most Americans acknowledge that the increasing number of working women makes it easier for families “to earn enough to live comfortably.”

Demographically and socioeconomically, single mothers and married mothers differ, according to the Census Bureau’s 2011 American Community Survey. The median family income for single mothers — who are more likely to be younger, black or Hispanic, and less educated — is $23,000. The median household income for married women who earn more than their husbands — more often white, slightly older and college educated — is $80,000. When the wife is the primary breadwinner, the total family income is generally higher.

Such marriages are still relatively rare, even if their share is growing. Of all married couples, 24 percent include a wife who earns more, versus 6 percent in 1960. (The percentages are similar for married couples who have children.)

                       

The implications for the stability of marriages is unclear. In surveys, Americans usually indicate that they accept marriages where the wife is the greater earner. Just 28 percent of Americans surveyed by Pew agreed that it is “generally better for a marriage if the husband earns more than his wife.”

But the data on actual marriage and divorce rates suggests slightly different attitudes.

A recent working paper by economists at the University of Chicago Booth School of Business and the National University of Singapore found that, in looking at the distribution of married couples by income of husband versus wife, there is a sharp drop-off in the number of couples in which the wife earns more than half of the household income. This suggests that the random woman and random man are much less likely to pair off if her income exceeds his, the paper says.

The economists also found that wives with a better education and stronger earning potential than their husbands are less likely to work. In other words, women are more likely to stay out of the work force if there is a big risk that they will make more than their husbands.

Perhaps even more tellingly, couples in which the wife earns more report less satisfaction with their marriage and higher rates of divorce. When the wife brings in more money, couples often revert to more stereotypical sex roles; in such cases, wives typically take on a larger share of household work and child care.

“Our analysis of the time use data suggests that gender identity considerations may lead a woman who seems threatening to her husband because she earns more than he does to engage in a larger share of home production activities, particularly household chores,” the authors write.

Of course, these patterns may change as the job market evolves. College degrees, for example, are becoming increasingly important to both finding and keeping a job. And women are more likely than men to get college degrees.

As of 2011, there were more married-couple families with children in which the wife was more educated than the husband, according to Pew. In roughly 23 percent of married couples with children, the women had more education; in 17 percent of the couples, the men had higher education. The remaining 61 percent of two-parent families involve spouses with about equal levels of education.

Norms are also changing: Newlyweds seem to show more openness to having the wife earn more than her husband than do longer-married couples. In about 30 percent of newly married couples in 2011, the wife earned more, versus just 24 percent of all married couples.

Americans are becoming more accepting of single mothers as well. In a survey conducted April 25-28, Pew found that 64 percent of Americans said the growing number of children born to unmarried mothers is a “big problem,” down from 71 percent in 2007. Republicans are more likely than Democrats or independents to be concerned about the trend.

Today’s single mothers are much more likely to have never been married than in the past, Pew found. In 1960, the share of never-married single mothers was just 4 percent; as of 2011, it had risen to 44 percent. Never-married mothers tend to make less money than their divorced or widowed counterparts, and are more likely to be a member of a racial or ethnic minority.

June 2, 2013

Austrailia Tops “Better Life” List

Happiest Industrialized Nations? Australia Tops ‘Better Life’ List – WSJ.com

05/28/2013 By D. Acheson

SYDNEY—A fading mining boom may be taking the gloss off Australia’s resource-rich economy but the country has retained the title of happiest industrialized nation in the world.

That’s according to the Organization for Economic Cooperation and Development’s Better Life Index, which ranked the world’s developed economies on criteria such as jobs, income, environment and health.

Australia kept the top spot for the third year running, ahead of Sweden—also known for its high living standards and robust economy—and Canada, a rival resource-exporting nation that, like Australia, has reaped the benefits of increasing Asian demand for raw materials.

The upbeat outlook comes as policy makers in Australia try to rebalance the economy, the world’s 12th largest, away from a heavy reliance on mining and energy exports toward growth in manufacturing, construction, and consumer spending.

The OECD survey of 34 industrialized nations didn’t award an overall top ranking. But if each of the 11 categories in the survey is given equal weight, Australia’s cumulative rank rises to No. 1, according to the OECD website.

“It’s the quality of life that one can enjoy here,” said Gaurav Chawla, 27, a careers adviser who moved to Sydney from New Delhi seven years ago. “It’s more secure here, cleaner, less cars on the road and less pollution.”

Australia’s high rank in the OECD index—based on data from the United Nations, individual governments and other sources—is largely due to its economy. The nation mostly sidestepped the economic woes afflicting much of the developed world after the financial crisis and has expanded for 21 years straight without a recession. Unemployment stood at 5.5% in April from 5.6% in March, compared with 12.1% in the euro zone.

“There is no one under the age of 40 now who has experienced a recession as an adult member of the workforce,” said Saul Eslake, an economist at Bank of America-Merrill Lynch in Sydney.

It isn’t just current residents who see Australia’s appeal. The government has so far attracted 170 applicants, believed to be mostly from China, to a new program to develop foreign investment by offering overseas millionaires the right of residency in return for a portion of their wealth. A record 5.7 million foreigners visited the country last year, led by tourists from the U.S. and China, even as the Australian dollar traded at close to 30 year highs.

There are weaknesses, though. Consumer confidence remains in the doldrums even after the central bank this month lowered interest rates to a record low 2.75%, adding to a string of rate-cuts since late 2011 designed to spur activity in weaker parts of the economy such as retail sales and housing. Households blame the poor mood on a rising cost of living, an unpopular government, and growing signs a long mining boom is nearing an end.

While the OECD survey found that Australians rank their life-satisfaction at 7.2 out of 10, higher than the average of 6.6, the reading is below levels recorded in Mexico, Norway and neighboring New Zealand.

Australia also ranks poorly in terms of work-life balance with more than 14% of employees working very long hours, well above the OECD average of 9%. And, somewhat surprisingly for a country famed for its beaches and barbecues, Aussies spend slightly less time on leisure activities and personal care—eating and sleeping—than their overseas peers.

The average household net wealth is estimated at US$32,178, well below the OECD average of US$40,516. The study finds a significant disparity in living standards, with the top 20% of Australia’s population living off an estimated US$58,409 per year compared with US$10,323 for the bottom 20%.

“The overall Australian way seems to be happy go lucky, but that’s not always the case,” said Ivana Mrsic, 18, a music student from Botany Bay, a suburb in Sydney’s south.

Still, any pessimism in the Pacific nation of 23 million people could be overdone in the context of the economic hardship being endured elsewhere, said Bank of America-Merrill Lynch’s Mr. Eslake.

“It’s easy for us to lose sight here in Australia of how difficult economic conditions have been in other OECD countries,” he said.

While locals complain of living costs, Australian households on average spend 19% of their disposable income on keeping a roof over their heads, below the OECD’s average of 21%. And 85% of Australian respondents said they were in good health, well above the survey average of 69%.

The negatives in Australia are more than offset by the beach lifestyle and climate, said Geraldine Alvarez, 33, who moved to Sydney from the Philippines two decades ago.

June 2, 2013

Case-Shiller shows area home prices up 16.6% in year

Home prices in Los Angeles and Orange counties shot up 16.6 percent in the 12 months ending in March, according to the latest S&P/Case-Shiller Home Price Index.

That’s the fourth index for March showing double-digit price increases in the region. Earlier, the Core-Logic Home Price Index showed Orange County home prices increased 17.2 percent in March. Indexes by DataQuick and the California Association of Realtors both showed 27 percent home-price gains.
It also was the region’s ninth consecutive month of year-over-year price gains in the Case-Shiller index, and the 13th showing home prices rising one month to the next.
Prices also were up 10.9 percent in a combined Case-Shiller index of 20 leading U.S. metro areas.

The news help sparked a rally on Wall Street, which saw the Dow Jones Industrial Average surge 106 points Tuesday, a gain of 0.7 percent to 15,409.
All 20 cities posted year-over-year growth for a third straight month, and 12 of the 20 had double-digit gains. It also was the biggest percentage gain nationwide since April 2006.

Phoenix again had the largest annual increase at 22.5 percent, followed by San Francisco with 22.2 percent and Las Vegas with 20.6 percent. The L.A.-O.C. area had the sixth-highest gain among the 20 U.S. metro areas.
March’s increase for the Los-Angeles-Orange County area was the biggest year-over-year percentage gain since April 2006, and was significantly above the average 5 percent annual appreciation rate for the past 27 years.
A rally took hold in the long-depressed housing market in mid-2012 after a sharp decline in foreclosures and underwater homes on the market, cutting overall listings to lows not seen in nearly a decade.
Demand also took off, sparking bidding wars among buyers. The combination of low inventory, fewer low-priced homes on the market and rising demand drove up prices.
“Home prices continued to climb,” says David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. “Other housing market data reported in recent weeks confirm these strong trends: housing starts and permits, sales of new home and existing homes continue to trend higher.”
But at the same time, he added that “the larger than usual share of multifamily housing, a large number of homes still in some stage of foreclosure and buying-to-rent by investors suggest that the housing recovery is not complete.”
Case-Shiller’s 20-city index hit bottom in March 2006 before turning around and rising in 10 of the previous 12 months. Still, the index remains 28 percent below the market peak of July 2006.
In the L.A.-O.C. area, the index was 32 percent below the region’s September 2006 price peak

June 2, 2013

Homes Sales Power Optimisim

Home prices surged during the first quarter at their fastest pace in nearly seven years, the latest sign of a sustained warm-up in an economic recovery that has otherwise been marked by starts and stops.

The housing-market revival—and an accompanying report on consumer confidence—adds new grist for a debate inside the Federal Reserve about how far to push its easy-money policies, including an $85 billion-a-month bond-buying program which has helped to keep mortgage rates near historic lows, boosted asset prices and begun to stimulate hiring and spending.

Fed officials say they have been considering when to wind down the program. Signs of a stronger housing market could give confidence to officials who want to be sure that the economy can stand on its own, without the bond buying. Still, they have been reluctant to get too enthusiastic about signs of an upturn, in part because the economy has disappointed before.

The latest reports were big factors driving financial markets Tuesday. Stock investors, encouraged by the strong data, sent the Dow Jones Industrial Average to a new high. At the same time, yields on the benchmark 10-year Treasury note climbed to 2.132%, the highest level in 13 months. Bond yields rise as prices fall, and the gain could have been a response to strong data—and also the prospect of a less active

“The data we’re seeing tells the Fed we’re moving in the right direction, but I don’t know if it’s enough to really have the Fed scale back what they’re doing,” said Scott Buchta, head of fixed-income strategy at Brean Capital LLC.

The market reaction reflected rising optimism that the U.S. economy has shaken off a potential spring slowdown and is on track for steady gains. Home prices in March rose 10.2% from a year earlier, the largest annual gain since prices began to fall in 2006, according to the Standard & Poor’s/Case-Shiller national index released Tuesday. Prices increased 1.2% in the first quarter, the first increase for the typically slower winter period since 2006. In a separate report, the Conference Board, a private research group, said Tuesday that its index of consumer confidence in May increased to the highest level since February 2008.                       

The pace of home-price gains has raised concerns among some economists over whether low mortgage rates have stimulated unsustainable home-price inflation—the proverbial bubble that some critics of Fed policies have feared. The average rate on the 30-year fixed mortgage, which is closely tied to yields on the 10-year Treasury, rose to 3.9% on Tuesday, the highest level in a year, according to HSH.com, a financial publisher.

At current interest rates, homes would still be affordable even if prices rose by 20% from their current levels, said John Burns, chief executive of a home-builder consulting firm in Irvine, Calif. “But what happens when [mortgage] rates go back to 7%? We’re going to have a bust.” He added, “If I were the Fed, I would stop buying mortgage-backed securities today.”

The worries about rapid price growth look especially founded in more expensive markets such as San Francisco, Los Angeles and San Diego that have witnessed double-digit price gains over the past year. While home prices still look cheap on a historical basis, “the trouble is that that impression is almost entirely the function of low mortgage rates,” said Stan Humphries, chief economist at Zillow Inc. Z -0.35%Cheap credit is “distorting housing considerably,” he said.

Others say it is too soon for alarm. Price gains largely reflect a rebound from low levels and prices remain largely in line with their long-run relationship between incomes and rents, said Christopher Thornberg, an economist with Beacon Economics in Los Angeles. “Could this thing go on too long? Absolutely,” he said. “Could it turn into the next bubble? Absolutely. But we’re not there yet, so I’m not going to start screaming ‘Bubble.’ “

The housing market has witnessed a surprising and sharp turnabout over the past year, first as investors have soaked up an oversupply of foreclosed properties and later as rising rents, low mortgage rates, and improving consumer confidence have unleashed pent-up demand for housing. Part of the rebound has been a function of the slump’s depths. Home prices remain down by 28% from their 2006 peak and have returned to levels last seen in late 2003.

Rising home prices should help buoy consumer confidence and the broader economy because houses represent the largest financial asset for many Americans. The home-price gains also should help housing markets by freeing more homeowners from being underwater, where they owe more than their homes are worth. Many would-be home buyers have complained in recent months over a paucity of desirable homes for sale, and home builders have taken advantage of supply constraints to boost prices. If price increases encourage more sellers to test the market, the new supply could boost sales volumes while tamping down price growth.

There are already signs that home prices are poised to stay hot this summer because the inventory of homes for sale is still depressed and buyer urgency has intensified. “There’s not enough supply to satisfy demand, so we will continue to see upside surprises over the next few months,” said Ivy Zelman, chief executive of Zelman & Associates, a housing research and advisory firm.

The Case-Shiller index can sometimes overstate the magnitude of price increases because it includes foreclosures. Over the past year, the share of foreclosed property sales has fallen, particularly in California cities, Las Vegas, and Phoenix, which have posted the largest year-on-year price growth. Because foreclosures and other distressed properties sell at a discount, prices tend to look worse as the share of foreclosed-property sales rise and they look better as the share drops. A separate index released Tuesday by Lender Processing Services Inc. LPS -1.08%showed that prices rose 7.6% in March from one year earlier.

Prices rose from one year earlier in all 20 cities measured by the Case-Shiller index, with the largest gains in the West or in markets pummeled by the housing bust. In March, prices were up 22.5% in Phoenix from one year earlier and 22.2% in San Francisco.