Rising home prices offer hope for President Obama on the economy

A new report showing home prices rising in 20 U.S. cities gave a boost to President Obama’s reelection chances on Tuesday.
 
The data amplified other reports that suggest the long-awaited recovery in the housing market is emerging six weeks before Election Day, and arrived alongside other encouraging news about increased consumer confidence and spending.

The signs of a turnaround in housing are coming at a fortuitous time for President Obama, who is running for reelection in a campaign dominated by concerns about his management of the economy.
 
“You probably have a somewhat more positive picture going into the election than people might have been thinking, say, two months ago,” Dean Baker, the co-founder of the liberal Center for Economic and Policy Research, said Tuesday.
 
Mitt Romney argues Obama has stifled the U.S. recovery with anti-business policies, and has been prosecuting the president’s record against a backdrop of disappointing job reports and tepid growth.

Worries about the weak recovery prompted the Federal Reserve earlier this month to announce unprecedented steps to stimulate hiring, and stocks actually slid Tuesday after a former official criticized the Fed’s actions.
 
Still, the news Tuesday offered several bright spots that suggest consumers are spending more and feeling more optimistic — a key for Obama, who is hoping voters will reelect him on the basis that things are slowly improving.
 
Unemployment stands at 8.1 percent, and if it does not fall before Election Day, Obama will try to become the first sitting president since Franklin Roosevelt to win reelection with a jobless rate above 8 percent.
 
The Standard & Poor's/Case-Shiller report released Tuesday found home prices were up 1.6 percent in 20 cities nationwide in July, and that 16 of those 20 had seen prices rise over the last year.
 
Prices have gone up in all 20 cities for the past three months, and Tuesday’s report showed the highest level of price growth year-to-year for seven years.

Housing analysts said the report does not appear to be a fluke.
 
"My view here all along is that this housing recovery began at least a year ago, maybe longer in specific markets, and it is just beginning to spread far enough to affect the national numbers," said David Crowe, chief economist of the National Association of Home Builders.
 
"The market is performing pretty consistently and the data across the market is agreeing with each other across time, so this is no fluke," Crowe said.
 
The Federal Housing Finance Agency in a separate report Tuesday found prices were up 0.2 percent in July and 3.7 percent in the past year.
 
"There are some good housing numbers showing that at least it is stabilizing," said Anthony Sanders, a real estate professor at George Mason University.
 
A separate report from the Conference Board Consumer Confidence Index found consumer confidence spiked in September, jumping to 70.3 from 61.3 in August. That’s the highest level tracked by the benchmark index since February.
 
And the Labor Department found consumers increased their average annual spending by 3.3 percent.
 
Polling by Gallup found Democrats are feeling better about the economy than Republicans or independents.
 
The pollster said Democrats' confidence in the economy leaped 10 points in the last week, from 20 to 30 — a jump that could be related to a rise in Democratic enthusiasm since the Democratic convention.
 
But the independent voters over whom Obama and Mitt Romney are competing fiercely saw their confidence in the economy dip slightly during that same time, falling to -27 from -23.
 
Economic experts have consistently said that the U.S. recovery would struggle to make headway without a resurgent housing market.
 
“It’s definitely positive,” Baker said.
 
Still, the housing market's recovery could take upward of six months to provide a lasting boost to not only the economy, but to the labor market, said Crowe.
 
Three major cities — Atlanta, Detroit and Las Vegas — are still experiencing home prices lower than they stood 12 years ago, and overall home values are still about 30 percent lower than their highest levels during the summer of 2006.
 
Improvements in the housing market are being dragged back by tight mortgage credit — despite historically low interest rates — and the sluggish job market.

And there are other fears for the economy likely to hold back growth through Election Day.
 
Mark Zandi, chief economist for Moody's Analytics, said an improving housing market will boost economic growth, but the threat of the “fiscal cliff” could derail any fledgling comeback.
 
"The economy isn't going anywhere fast until the looming fiscal issues are reasonably resolved," he told The Hill. "As soon as the fiscal issues are addressed, the improving housing market will power a much stronger economy."

---