Even cities that weathered the housing market crash with relatively little damage are suffering now.
Severe price declines have spread to Dallas, Denver, Minneapolis and Cleveland, which had mostly withstood the bust in housing since 2006. The damage has now gone well beyond cities hit hardest by unemployment and foreclosures, such as Phoenix and Las Vegas.
“We didn’t enjoy the highs and the lows like other cities,” said Kay Weeks, a Realtor with Ebby Halliday in Dallas, where prices fell nearly 1 percent in March and are expected to keep falling. “But when we get bad news nationally, people take notice and cut back on spending and buying homes.”
Home prices in big metro areas have sunk to their lowest since 2002, the Standard & Poor’s/Case-Shiller 20-city monthly index showed Tuesday. Since the bubble burst in 2006, prices have fallen more than they did during the Great Depression.
The index, which covers metro areas that include about 70 percent of U.S. households, is updated every quarter and provides a three-month average. The March data is the latest available.
Foreclosures have forced prices down so much that some middle-class neighborhoods have turned into lower-income areas within months.
Prices are expected to keep falling until the glut of foreclosures for sale is reduced, companies start hiring in greater force, banks ease lending rules and more people think it makes sense again to buy a house. In some markets, that could take years.
The latest report points to a “double dip in home prices across much of the nation,” said David Blitzer, chairman of the Index Committee at Standard & Poor’s.
Prices fell from February to March in 18 of the metro areas tracked by the Standard & Poor’s/Case-Shiller index. And prices in a dozen markets have reached their lowest points since the housing bubble burst in late 2006.
The overall index fell for the eighth straight month and has dropped 3.6 percent in the past year. Prices had risen last summer, fueled by a temporary federal homebuying tax credit. But they’ve tumbled 7 percent since then. After adjusting for inflation, the home-price index has sunk to the level of 1999.
Cities with high foreclosures such as Phoenix, Las Vegas and Tampa, Fla., are flooded with homes sitting vacant, awaiting buyers. Many banks have agreed to allow homes at risk of foreclosure to be sold for less than what is owed on their mortgages. That has pulled down prices.
In Phoenix, for example, home prices rose about 5 to 6 percent annually in the pre-boom years before exploding nearly 23 percent in 2004. The next year, in 2005, they skyrocketed nearly 43 percent. Prices there soon leveled off before plunging in 2007 and 2008. They’re now back to 2000 levels.
Coastal areas, such as San Francisco, San Diego, Los Angeles, Washington and Boston, have fared comparatively better in the past two years. They have been helped by healthy local economies, desirable city centers and limited space for new housing. In New York, homes are still 63 percent more expensive than in 2000.
In the middle are cities like Dallas, Denver, Minneapolis and Cleveland, which are seen as bellwethers for the national housing market.
Before the housing boom, prices in Minneapolis rose 7 percent or more a year. Then they stalled in 2006, fell in 2007 and 2008, and rose modestly in 2009. Last year, prices started falling again and haven’t stopped.
Over the past decade, Dallas has grown faster than any other metro area. Among companies that have moved their headquarters there are Comerica Inc. and AT&T. Construction surged to meet the demand.
But since the housing bubble burst, foreclosures have risen. Many homes have been sold at steep discounts. Dallas-area foreclosures bought at auction in March sold for just 57 percent of their appraised value, according to Foreclosure Listing Service.
Denver had also avoided the peaks and valleys of the bubble and bust pay day loans. It enjoys a diversified local economy that has expanded to include the telecommunications, wind-energy and space-technology industries.
Foreclosures haven’t flooded the Denver market. But many of Denver’s potential buyers, most of whom would otherwise be first-timers, are opting to rent instead.
“When they’re doing the calculations to rent versus buy, they’re choosing to rent,” said Gary Bauer, a broker in Littleton, Colo., outside Denver. “It’s simple math, and for many people, it’s too expensive to own.”
As a result, falling prices have turned once-costly, newer subdivisions, including those in Aurora and Commerce City, into largely vacant neighborhoods.
“The closer to the mountains you are here, the pricier it is, so people built a lot of new, big homes during the housing boom,” said Yve Roberts, a Denver real estate agent. “They thought that’s where the next wave of houses would be. But many of the young people that bought there can’t afford it anymore.”
In the next two months, prices in Dallas and Denver are expected to reach their lowest since the housing downturn began.
In 12 other cities, prices are already at the lowest point since the end of the boom: Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland, Ore., and Tampa, Fla.
Minneapolis fared the worst in March, with prices down 3.7 percent. They dropped 2.4 percent in Charlotte and Chicago and 2 percent in Detroit. Prices rose 0.1 percent in Seattle and 1.1 percent in Washington. The nation’s capital is the only metro area in the index where prices have risen in the past year.
One obstacle to a rebound in prices: A delay in processing foreclosures. Homes in foreclosure sell at a 20 percent discount on average, which can hurt prices in the neighborhood. But many foreclosure sales have been delayed while federal regulators, state attorneys general and banks review how those foreclosures were carried out over the past two years.
Once those homes are eventually foreclosed upon, they will cause prices to fall even further. Those declines are “etched in stone,” said Patrick Newport, U.S. economist at IHS Global Insight.
Falling home prices led Neil Isakson of Amery, Wis., about an hour and a half from Minneapolis, to pull his four-bedroom lakefront house off the market this spring after it went unsold for nearly two years.
Isakson chose to rent out the home rather than reduce the price further. He had listed it in June 2009 for $359,000. Last summer, he cut it to $339,000. Yet fewer than a dozen people showed up to look at the house. He’s holding out for the market to recover.
“I’m willing to wait two to three years,” Isakson said.
Home equity accounts for most of the wealth of typical households. So when prices fall, they have “important spillover effects on other sectors of the economy,” said Yelena Shulyatyeva, an analyst at BNP Paribas. Those sectors include consumer spending and state and local property tax collections. Consumer spending fuels about 70 percent of the overall economy.
“Folks are having so much difficulty in getting financing for a home,” said Mark Vitner, senior economist at Wells Fargo. “And foreclosures will likely bring about a third dip. It may be early next year before prices hit bottom.”
That won’t change soon. Roughly 92 percent of homeowners say it’s a bad time to sell their home, according to the latest Thomson Reuters/University of Michigan index of consumer sentiment.
In the seven years before its peak in July 2006, the home-price index surged 155 percent. Since then, it’s fallen 33 percent.
During the Great Depression, prices fell 31 percent. It took 19 years for the housing market to regain its losses after the Depression ended.
Russia’s central bank unexpectedly raised its overnight deposit rate, signaling it may refrain from tightening monetary policy again as price pressures ebb and the economic recovery remains shaky.
Bank Rossii raised the fixed overnight deposit rate to 3.5 percent from 3.25 percent, effective May 31, the fourth increase since December, the Moscow-based central bank said today in an e-mailed statement. Nine of 20 economists in a Bloomberg survey predicted the move. The refinancing rate and overnight auction- based repurchase rates were left at 8.25 percent and 5.50 percent, in line with economists’ expectations.
Chairman Sergey Ignatiev is trying to keep inflation between 6 percent and 7 percent without stifling credit flows and undermining an economic recovery in the world’s biggest energy supplier. The inflation rate is now “in order” and the bank will be “very cautious” in raising borrowing costs to “avoid hurting economic growth,” Ignatiev said May 26.
Today’s increase and earlier measures “provide an acceptable balance between the risks of continued inflationary pressure and slowing economic growth for the nearest months,” the central bank said.
Ruble Weakens
Policy makers left mandatory reserve ratios unchanged for a second month after lifting them in January, February and March. Economists expect Bank Rossii to resume increases in the second half of the year, according to the median of 12 forecasts in a Bloomberg survey.
The ruble erased gains after advancing on the decision and was 0.1 percent lower against the dollar at 28.0850 at 5:40 p.m. in Moscow. Russia’s ruble bonds due March 2014 slid for the first time in three days, pushing the yield 3 basis points higher to 6.59 percent.
The Micex Index of 30 stocks added to gains after the announcement and was up 0.3 percent at 1,642.13 at 4:42 p.m.
“It’s a signal for the market that the central bank continues to be watching inflation, and that it potentially intends to tighten policy if economic growth firms and consumers proceed with their current behavior of lower savings and higher borrowing,” Dmitry Polevoy, chief economist for Russia and Kazakhstan at ING Groep in Moscow, said by telephone.
Slowest Growing
The slowest-growing economy among the so-called BRIC nations, Russia is relying on revenue from oil to bolster its recovery, while seeking ways to reduce its reliance on energy exports. Oil at more than $100 a barrel is no longer stoking economic expansion, which slowed to 4.1 percent in the first quarter from 4.5 percent in the fourth. Growth slid further in April, to 3 on line pay day loans.3 percent, the Economy Ministry said May 26.
The economy will expand 4.5 percent next year, compared with 9.1 percent for China and 7.8 percent for India, the International Monetary Fund forecast in April.
The pace of inflation has shown signs of steadying. Consumer-price growth in May will probably match the rate from the same month last year, when prices gained a monthly 0.5 percent, Ignatiev said May 26. The annual rate in April matched an 18-month high of 9.6 percent and reached 9.7 percent as of May 23, the central bank said today.
Consumer price growth “remains relatively low” in monthly terms, policy makers said in the statement. Food-price growth has slowed as the knock-on effects from last year’s drought, the country’s worst in 50 years, eased, the bank added.
Grain Ban Lifted
A ban on grain exports introduced as a result of the drought will be allowed to expire July 1, representing the “only serious, significant risk factor” for inflation, Ignatiev said today, the RIA Novosti news service reported.
Russian grain prices are now about half global levels, First Deputy Prime Minister Viktor Zubkov said in a meeting with Prime Minister Vladimir Putin May 28.
Unlike their counterparts in Brazil, China and India, Russian policy makers preferred currency gains and higher reserve requirements for lenders as inflation-fighting tools to help fledgling growth. The ruble has gained 9 percent so far this year after the bank relaxed currency controls.
Elections
With parliamentary elections at the end of the year and presidential elections in early 2012, policy makers will probably step up their inflation-fighting rhetoric and revive efforts to meet this year’s price goal, according to Timothy Ash, head of emerging-market research at Royal Bank of Scotland Group Plc in London.
Previously the central bank “put a greater weight on growth, but with signs the population is becoming increasingly sensitive to the impact of inflation on real disposable incomes, and with opinion polls showing a dip in support for the ruling elites, controlling inflation is also center stage,” Ash wrote in a note e-mailed on May 26.
The central bank cited high unemployment, slowing industrial production growth, and an “extremely low” level of investment as key risks to growth. Consumers are borrowing and spending more while saving less, which could boost economic growth and inflation, it said.
Air Canada
Japan’s consumer prices in April rose for the first time in more than two years on a temporary spike in energy and tobacco prices, the government said Friday.
Japan’s core consumer price index, which excludes fresh food, climbed 0.6 percent last month from a year earlier, marking the first year-on-year increase since December 2008, the Ministry of Internal Affairs and Communications said.
The rise in Japanese consumer prices was due to a jump in gasoline and tobacco prices. The ministry said education costs were also higher in April. On a month-on-month basis, Japan’s core consumer price index was up 0.4 percent last month.
But economist Hiroshi Watanabe at the Daiwa Institute of Research said the April increase in consumer prices does not mean Japan’s economy has emerged from deflation.
“The April results were mainly lifted by temporary factors, such as a surge in tobacco prices. Overall, Japan’s economy still remains under deflationary pressure as the economy has yet to post a steady recovery,” he said.
The world’s No. 3 economy has been battling periods of deflation _ or a steady decline in prices _ since the 1990s. Deflation is a burden as it can hamper economic growth by depressing company profits, sparking wage cuts and causing consumers to postpone purchases. It also can increase debt burdens.
Faced with tumbling output and exports following the March 11 earthquake and tsunami, Japan’s economy recently slipped into a recession after contracting at an annualized rate of 3.7 percent in the January-March quarter.
DETROIT
Stock futures are down sharply as new warnings about European finances stoke fears about that region’s debt crisis. The euro dipped to its lowest level in two months.
Ahead of the opening bell, Dow Jones industrial average futures are down 97, or 0.8 percent, at 12,369. S&P 500 index futures are down 10, or 0.8 percent, at 1,317. Nasdaq 100 futures are down 20, or 0.8 percent, at 2,324.
Ratings agency Standard & Poor’s cut its outlook Saturday on Italy’s debt to negative from stable.
Financial markets in Spain are down sharply after a defeat for its ruling Socialist party caused investors to fear that the government cannot solve its public finance issues.
On Friday, the Fitch ratings agency downgraded Greece’s debt rating further into junk status.
Earlier this month, Bell and Quebecor, two giants in the Canadian broadcasting and telecom landscape, became embroiled in a dispute over Sun News Network, the recently launched all-news television station.
At first glance, the dispute appeared to be little more than a typical commercial fight over how much Bell should pay to Quebecor to carry the Sun News Network channel on its satellite television package. When the parties were unable to reach agreement, Bell removed Sun News, leaving a placeholder message indicating
This Memorial Day weekend Americans will be skipping the souvenir tee-shirt.
More travelers are expected to hit the road than have since the Great Recession. But they’ll be keeping a tight grip on their wallets thanks to higher gas prices. The typical family plans to spend $692, a decrease of 14 percent from last year’s $809.
“You’ll see people eating sandwiches out the cooler instead of going into a restaurant,” says Susanne Pelt, spokeswoman for the South of the Border roadside attraction in South Carolina.
AAA projects 34.9 million Americans will travel 50 miles or more from home _ a slight increase of 100,000 travelers from last year and the highest number since 2007. But those who do make the journey will be spending a lot less, AAA and its survey partner IHS Global Insight say, based on interviews with 325 Americans who plan to travel for the holiday.
Rising gas prices are on the minds of 40 percent of travelers, with many planning to take shorter trips or otherwise conserve money. That might mean picking a Holiday Inn Express over a Holiday Inn or driving to a free beach instead of an amusement park.
But most refuse to abandon their vacation altogether.
“Americans really believe a vacation is a right,” says Joseph A. McInerney, CEO of the American Hotel & Lodging Association. “It’s not a luxury.”
And it’s not just higher gas prices that families have to deal with.
Rates at AAA three diamond hotels are expected to increase 5 percent from a year ago to $148 a night. Cheaper two diamond properties are up 10 percent to $109.
“We are seeing some folks who are saying they have to pinch pennies to make the trip,” says Paula Werne, spokeswoman for Holiday World in the southern Indiana town of Santa Claus.
With the stock market up and the economy generally better than a year ago, not everybody is scrimping and saving.
AAA predicts that 2.93 million people will board an airplane over the Memorial Day weekend, up 11.5 percent from last year despite higher airfares. The airlines have hiked airfares seven times since the start of the year. The average cost of a ticket is up more than 10 percent from last year.
That spike in air travel has also driven up the total distance families are expected to travel to 792 miles. That’s 27 percent greater than last year’s average travel distance of 626 miles.
Increased air travel is a sign that people at the higher end of the income scale are faring better. Those with incomes above $50,000 a year make up 69 percent of those who plan to travel, according to AAA. Last year, they were just 58 percent of the total.
The reason: higher gas prices take up a larger share of lower-income families’ household budgets.
As Memorial Day weekend approaches, pump prices are at their highest level in three years. That’s because oil rose 35 percent from mid-February through late April.
AAA conducted its survey from April 19 to April 23. Since then, gas prices have fallen. The average retail price slipped 8 cents in the past two weeks. Further declines are expected. That could help hotels, resorts and restaurants who count on summer tourists.
Last year, the price of gas fell 20 cents a gallon from the time of AAA’s survey to Memorial Day. AAA had originally predicted 32.1 million would travel. Ultimately, that number was 34.8 million.
Still, gas prices are above $4 a gallon in nine states and the District of Columbia. That plays a large part in people’s vacation planning.
“Gas prices are much more psychological than financial for most people,” says Steve Carvell, associate dean for academic affairs at Cornell University’s School of Hotel Administration.
Americans are paying an average of $3.91 a gallon at the pump _ $1.05 more than last year. That’s an extra $37 for a family driving 800 miles over the weekend.
“For most people, that’s not going to make or break a vacation plan,” Carvell says.
Brad Garner, chief operating officer at travel firm at STR Global, says people will find a way to make trips work.
The extra cost to fill up the family car over the holiday weekend equates to “a pizza and a six-pack of beer,” says Garner.
Many businesses are playing into that phycology, with hotels and tourist attractions once again offering gas cards to guests.
The Door County Maritime Museum in Sturgeon Bay, Wis., and the Wisconsin Maritime Museum about 100 miles to the south recently started a joint effort to encourage travelers to drive to the two museums, stopping at several cities along Lake Michigan along the way.
Bob Desh, executive director of the first museum says he wants tourists to look at the area differently.
“This is kind of a one-tank weekend trip along the coast,” Desh says.
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Mayerowitz reporter from New York. Reporters Jeffrey Collins in Columbia, S.C., John Seewer in Toledo, Ohio, and Carrie Antlfinger in Milwaukee, Wis., contributed to this report.
LinkedIn priced its IPO at $45 per share to set up the first stock market debut among a fraternity of Internet networking services that’s captivating investors.
The pricing completed late Wednesday marks the final step before LinkedIn Corp.’s shares are available in the public market for the first time in the company’s eight-year history. Shares are expected to begin trading Thursday morning.
Most analysts believe the shares are likely to rise Thursday, even though LinkedIn raised the IPO price by 30 percent from its initial target of $32 to $35 per share paydayloan.
The IPO puts a $4.3 billion market value on LinkedIn, the highest for a U.S. Internet company taking its first bow on Wall Street since Google Inc. went public nearly seven years ago.
Libya’s oil minister defected and fled to Tunisia, a Tunisian security official said Tuesday, one of the highest profile figures to abandon Moammar Gadhafi’s government.
Shukri Ghanem, the head of the National Oil Co. and Libya’s oil minister, crossed into Tunisia by road on Monday and defected, the Tunisian official said. The official, based in the region around the Ras Jdir border crossing, spoke on condition of anonymity because he was not authorized to speak to the media.
Ghanem is one of the most prominent members of Gadhafi’s government to leave amid fighting between the military and rebels seeking to end Gadhafi’s more than 40-year rule.
Others who have defected include Foreign Minister Moussa Koussa, one of Gadhafi’s earliest supporters; Interior Minister Abdel-Fatah Younes; Justice Minister Mustafa Abdul-Jalil, and Ali Abdessalam Treki, a former U.N. General Assembly president. A number of ambassadors and other diplomats also have resigned their posts.
A NATO-led campaign _ authorized by the United Nations _ is enforcing a no-fly zone over the country and launching airstrikes to try to protect civilians from attacks by Gadhafi’s forces.
Early Tuesday, NATO jets pounded two government buildings in the Libyan capital, including the Interior Ministry, setting them on fire. A government spokesman suggested that the ministry was targeted because it contained files on corruption cases against senior members of the Benghazi-based rebel leadership.
In Geneva, meanwhile, the U.N. refugee agency said Tuesday that Libyan authorities appeared to be encouraging African migrants to board unseaworthy boats bound for Europe.
Melissa Fleming, a spokeswoman for the U.N. High Commissioner for Refugees, told reporters that the Libyan conflict has opened up a route for migrants that was closed for two years because of an agreement between Libya and Italy.
Already some 14,000 people _ mostly from sub-Saharan Africa _ have used Libya as a springboard to reach Europe, and thousands more are poised to make the treacherous sea journey in the coming weeks as weather conditions in the Mediterranean improve.
“The authorities (in Libya) are not discouraging, at all, in fact there may be signs that they are encouraging these boat journeys,” she said.
Some are migrants fleeing the fighting in Libya, but others appear to be crossing into Libya from elsewhere in Africa because it is easier to get onto smugglers’ boats there.
Ghanem, the latest minister to defect, had been at odds with the Gadhafi regime before, basically losing his post for a while in 2009 as two of Gadhafi’s sons differed on the direction the country should take in reforming its political and economic systems. His resignation was seen, at least in part, as linked to the creation of a new superstructure governing the nation’s oil sector, with the new agency designed to replace one he supported.
Before assuming the oil ministry’s portfolio, Ghanem served for around three years as prime minister at a time when Libya was emerging from under the cloud of more than a decade of international sanctions.
Ghanem is among Gadhafi government officials under U.S. sanctions announced by the Treasury Department in early April.
Abdel Moneim al-Houni, a former Libyan Arab League representative who was among the first wave of Libyan diplomats to defect, confirmed that Ghanem had defected but said no official announcement has been made out of concern for the safety of family members who are still in Tripoli. Al-Houni said that he spoke to Ghanem after he crossed the border.
“Most of the officials remaining in Tripoli are forced to stay under intimidation and pressure. They are not happy with what is happening,” Al-Houni told the AP.
Guma El-Gamaty, London-based spokesman for the Libyan opposition’s Interim National Council, said “all what we know is that Shukri Ghanem is in Tunisia.”
NATO has stepped up strikes on the Libyan capital Tripoli, and one of the buildings hit early Tuesday was used by the Interior Ministry, which is responsible for internal security.
Libyan spokesman Moussa Ibrahim suggested the ministry was targeted because it contained files on rebel leaders in Benghazi, the de-facto capital of the eastern half of the country, which is under opposition control.
“If they (NATO) are really interested in protecting civilians … then we call upon them to stop and start talking to us,” Ibrahim said.
In Moscow, Russia’s foreign minister on Tuesday urged Libya’s government representatives to allow the delivery of humanitarian aid.
Minister Sergey Lavrov says that Gadhafi’s representatives reiterated their willingness to consider a peace plan tabled by the African Union that called for an immediate cease-fire and dialogue between the government and the rebels. The rebels have rejected that plan.
The meeting follows a Monday visit to Moscow by the United Nations special envoy for Libya.
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