Americans signed the most contracts to buy homes in July than at any other point in the last two years, further evidence of a housing recovery.
The National Association of Realtors said Wednesday that its index of sales agreements for previously occupied homes jumped 2.4 percent in July to 101.7. That's higher than June's reading of 99.3. It's also the highest reading since April 2010, the last month that buyers could qualify for a federal home-buying tax credit.
A reading of 100 is considered healthy. The index is 12.4 percent higher than July 2011. It bottomed at 75.88 in June 2010 after the tax credit expired.
Contract signings typically indicate where the housing market is headed. There's generally a one- to two-month lag between a signed contract and a completed deal.
The Realtors' group said contract signings increased in July in all regions of the U.S. except for the West, which it said has a severe shortage of available homes for sale.
The increase is the latest sign that the home sales are finally rebounding five years after the housing bubble burst.
Last week, the National Association of Realtors said completed sales of previously occupied homes jumped 10 percent in July compared with the same month last year. Sales of newly built homes were up 25 percent in that same 12-month period.
Builder confidence rose this month to its highest level in five years. And the average rate on a 30-year fixed mortgage has been below 4 percent all year.
Home prices have also started to rise consistently, which could boost sales further in the months to come. The Standard & Poor's/Case Shiller index released Tuesday showed the first year-over-year increase in home prices since September 2010.
Still, the housing market has a long way to go to reach a full recovery. Some economists forecast that sales of previously occupied homes will rise 8 percent this year to about 4.6 million. That's still well below the 5.5 million annual sales pace that is considered healthy.
One trend holding back sales is that inventories of homes are low.
Overall, there were 2.4 million homes for sale in July, down 24 percent in the past year. It would take about 6.4 months to exhaust that supply at the current sales pace. That's just above the six months' inventory that typically exists in a healthy economy.
Thursday, August 30, 2012
Isaac brings higher gas prices, south and north
Drivers are being hit with the biggest one-day jump in gasoline prices in 18 months just as the last heavy driving weekend of the summer approaches.
As Hurricane Isaac swamps the nation's oil and gas hub along the Gulf Coast, it's delivering sharply higher pump prices to storm-battered residents of Louisiana and Mississippi — and also to unsuspecting drivers up north in Illinois, Indiana and Ohio.
The national average price of a gallon of gas jumped almost five cents Wednesday to $3.80, the highest ever for this date. Prices are expected to continue to climb through Labor Day weekend, the end of the summer driving season.
"The national average will keep ticking higher, and it's going to be noticeable," says Patrick DeHaan, senior petroleum analyst at Gasbuddy.com
The wide storm shut down several refineries along the Gulf Coast and others are operating at reduced rates. In all, about 1.3 million barrels per day of refining capacity is affected. So, it's no surprise that drivers in Louisiana, Alabama, Mississippi and Florida saw gas prices rise by a dime or more in the past week.
But some states in the Midwest are suffering even more dramatic spikes. Ohio prices jumped 14 cents, Indiana prices soared 13 cents and Illinois prices jumped 10 cents on Wednesday alone according to the Oil Price Information Service. Days before Isaac is expected to douse those states with rain, the storm forced the shutdown of a pipeline that serves a number of Midwest refineries.
Drivers in the region were angry and confused. ""I saw gas in my neighborhood for $3.56 a gallon just Tuesday morning, and now I'm paying $3.95. It's terrible," said Mary Allen of Cincinnati as she paid $20 for just over five gallons of gas. She wondered how Isaac could drive up gas prices in Ohio — and then resigned herself to a holiday weekend without travel.
The price surge is happening at the wrong time and the wrong place for Dickson Stewart, a 56-year-old electronics consultant, who is driving from Minneapolis to Savannah, Ga. this week. He stopped at a BP station in downtown Chicago Tuesday — home to some of the highest retail prices in the country — and paid $4.49 a gallon to fill up his Jeep Wrangler.
Stewart expects gas prices to fall after Labor Day. Analysts say he's probably right.
As Isaac fades away, the summer driving season ends, and refiners switch to cheaper winter blends of gasoline, stations owners should start dropping prices. "There is some very good relief in sight," DeHaan says.
When Katrina hit in 2005, the national average for gas spiked 40 cents in six days and topped $3 per gallon for the first time. Isaac likely won't have the same result, though its full impact on the refineries is yet to be determined.
The refineries are not expected to suffer long term damage. But refiners decided to shut down or run at reduced rates to protect their operations.
These facilities consume enormous amounts of electric power and generate steam to cook crude oil into gasoline, diesel, jet fuel and heating oil. If a refinery loses power suddenly, operators can't properly clear the partially cooked oil out of pipes, and re-starting the refinery can take several days or even weeks.
In advance of Isaac, refineries instead conducted what is known as an orderly shutdown, so they can re-start as soon as the power supply is assured again. The Gulf refineries will likely stay off line for about three days.
Isaac cut into the amount of gasoline being produced, and raised fears that supplies could fall dangerously low if the storm proved worse than expected. When supplies drop or are threatened, wholesale prices rise. Then distributors and station owners have to pay more to fill up their station's tanks. They then raise their prices based on how much they paid for their current inventory, how much they think they will have to pay for their next shipment, and, how much their competitors are charging.
Prices spiked particularly high in the Midwest because Isaac forced Shell to close a pipeline that delivers crude from St. James, La. to refineries in the region.
Gasoline prices are particularly vulnerable to spikes around this time of year. Refiners keep a low supply of more expensive blends as driving season ends, knowing they'll soon be able to make cheaper winter blends of gasoline.
"We are really working with a just-in-time delivery system," said Tom Kloza, chief oil analyst at the Oil Price Information Service.
Pump prices were on the rise even before Isaac blew in. The average price for gas rose about 40 cents from July 1 to mid-August because of higher oil prices and refinery problems in the Midwest and West Coast. At $3.80 per gallon, the national average is the highest since May 1 and well above the previous record for Aug. 29, $3.67 in 2008.
Wednesday's jump of a nickel was the 10th biggest one-day jump on record, according to OPIS, and the biggest since the average price rose 6 cents on February 15, 2011 when turmoil in Libya was rising.
But prices could quickly come down if refineries can soon get up and running. Crude oil prices fell Wednesday and wholesale gasoline prices fell the past two days, suggesting the spike in retail gasoline prices could be short-lived. Americans will soon do less driving and the switch to cheaper blends will be well underway by mid-September.
As Hurricane Isaac swamps the nation's oil and gas hub along the Gulf Coast, it's delivering sharply higher pump prices to storm-battered residents of Louisiana and Mississippi — and also to unsuspecting drivers up north in Illinois, Indiana and Ohio.
The national average price of a gallon of gas jumped almost five cents Wednesday to $3.80, the highest ever for this date. Prices are expected to continue to climb through Labor Day weekend, the end of the summer driving season.
"The national average will keep ticking higher, and it's going to be noticeable," says Patrick DeHaan, senior petroleum analyst at Gasbuddy.com
The wide storm shut down several refineries along the Gulf Coast and others are operating at reduced rates. In all, about 1.3 million barrels per day of refining capacity is affected. So, it's no surprise that drivers in Louisiana, Alabama, Mississippi and Florida saw gas prices rise by a dime or more in the past week.
But some states in the Midwest are suffering even more dramatic spikes. Ohio prices jumped 14 cents, Indiana prices soared 13 cents and Illinois prices jumped 10 cents on Wednesday alone according to the Oil Price Information Service. Days before Isaac is expected to douse those states with rain, the storm forced the shutdown of a pipeline that serves a number of Midwest refineries.
Drivers in the region were angry and confused. ""I saw gas in my neighborhood for $3.56 a gallon just Tuesday morning, and now I'm paying $3.95. It's terrible," said Mary Allen of Cincinnati as she paid $20 for just over five gallons of gas. She wondered how Isaac could drive up gas prices in Ohio — and then resigned herself to a holiday weekend without travel.
The price surge is happening at the wrong time and the wrong place for Dickson Stewart, a 56-year-old electronics consultant, who is driving from Minneapolis to Savannah, Ga. this week. He stopped at a BP station in downtown Chicago Tuesday — home to some of the highest retail prices in the country — and paid $4.49 a gallon to fill up his Jeep Wrangler.
Stewart expects gas prices to fall after Labor Day. Analysts say he's probably right.
As Isaac fades away, the summer driving season ends, and refiners switch to cheaper winter blends of gasoline, stations owners should start dropping prices. "There is some very good relief in sight," DeHaan says.
When Katrina hit in 2005, the national average for gas spiked 40 cents in six days and topped $3 per gallon for the first time. Isaac likely won't have the same result, though its full impact on the refineries is yet to be determined.
The refineries are not expected to suffer long term damage. But refiners decided to shut down or run at reduced rates to protect their operations.
These facilities consume enormous amounts of electric power and generate steam to cook crude oil into gasoline, diesel, jet fuel and heating oil. If a refinery loses power suddenly, operators can't properly clear the partially cooked oil out of pipes, and re-starting the refinery can take several days or even weeks.
In advance of Isaac, refineries instead conducted what is known as an orderly shutdown, so they can re-start as soon as the power supply is assured again. The Gulf refineries will likely stay off line for about three days.
Isaac cut into the amount of gasoline being produced, and raised fears that supplies could fall dangerously low if the storm proved worse than expected. When supplies drop or are threatened, wholesale prices rise. Then distributors and station owners have to pay more to fill up their station's tanks. They then raise their prices based on how much they paid for their current inventory, how much they think they will have to pay for their next shipment, and, how much their competitors are charging.
Prices spiked particularly high in the Midwest because Isaac forced Shell to close a pipeline that delivers crude from St. James, La. to refineries in the region.
Gasoline prices are particularly vulnerable to spikes around this time of year. Refiners keep a low supply of more expensive blends as driving season ends, knowing they'll soon be able to make cheaper winter blends of gasoline.
"We are really working with a just-in-time delivery system," said Tom Kloza, chief oil analyst at the Oil Price Information Service.
Pump prices were on the rise even before Isaac blew in. The average price for gas rose about 40 cents from July 1 to mid-August because of higher oil prices and refinery problems in the Midwest and West Coast. At $3.80 per gallon, the national average is the highest since May 1 and well above the previous record for Aug. 29, $3.67 in 2008.
Wednesday's jump of a nickel was the 10th biggest one-day jump on record, according to OPIS, and the biggest since the average price rose 6 cents on February 15, 2011 when turmoil in Libya was rising.
But prices could quickly come down if refineries can soon get up and running. Crude oil prices fell Wednesday and wholesale gasoline prices fell the past two days, suggesting the spike in retail gasoline prices could be short-lived. Americans will soon do less driving and the switch to cheaper blends will be well underway by mid-September.
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