Home prices rise

Mitchell Hartman Sep 27, 2011

Home prices rise

Mitchell Hartman Sep 27, 2011

Kai Ryssdal: This has been the summer of our economic discontent. Recession made worse by stock market turmoil and political stalemate. So one reads the daily statistical tea leaves fairly closely, looking for something to hang onto.

There was a glimmer today. The S&P/Case-Shiller Home Price Index for 20 big U.S. cities was up a tenth-of-a-percent in July, though down from a year ago. Consumer confidence was up last month, though lower than it was this spring.

So we sent Marketplace’s Mitchell Hartman off this morning with this assignment: Hey Mitchell, find us some good news, will ya?

Mitchell Hartman: Here’s how recessions usually end: The government keeps interest rates really low to spur growth — and that makes it easier to buy a house. Builders start breaking ground. They hire construction workers.

Well, interest rates sure are low right now. But that’s about the only thing in this script that’s gone right, says Paul Dales at Capital Economics.

Paul Dales: The problem is that low interest rates aren’t really much comfort when households aren’t able to qualify for a loan. So that means during this economic recovery, residential investment has added nothing to economic growth at all.

Consumer spending is a major driver of the economy. Couldn’t consumers step up?

Chris Christopher: Consumers are spending on needs and not desires. In addition, inflation is up, so they’re actually paying more and getting less.

Economist Chris Christopher at IHS Global Insight says consumers are in a state of high anxiety over gridlock on Pennsylvania Avenue and turmoil on Wall Street.

Christopher: And there’s nowhere they can turn to: not the job market, not increase in their housing wealth. And now equity markets are not doing well, so they’re taking another hit.

But the big companies are doing pretty well. They cut costs and workers in the recession, and now profits are rolling in. Can’t we look to them for some economic love?

Bernard Baumohl: Companies are now sitting on a record $2 trillion cash. That money is essentially idle.

That’s Bernard Baumohl at the Economic Outlook Group.

Baumohl: And given the political paralysis in Washington, and how everyone is revising down growth for the future, there’s really not much of an incentive to tap those idle reserves and hire more workers.

Baumohl says big companies are doing well exporting. They just don’t need many additional U.S. workers to do that.

I’m Mitchell Hartman for Marketplace.

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