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Wednesday September 2nd, 2015 10:51AM

US home prices up slightly; trade deficit declines

By The Associated Press
WASHINGTON (AP) -- U.S. home prices barely rose in November from the previous month and year-over-year gains slowed, reflecting declines in sales in the fall. In another report, the government says the U.S. trade deficit fell in November to its lowest level in four years.

Real estate data provider CoreLogic said Tuesday that prices increased just 0.1 percent in November from October. That's down slightly from October and far below August's 0.9 percent gain.

The figures aren't adjusted for seasonal patterns, such as cold winter weather that typically slows sales. Home prices have risen a healthy 11.8 percent from a year ago, CoreLogic said. But that's the smallest yearly gain since March.

Rising home prices and higher mortgage rates held back sales at the end of last year. Existing home sales fell from September through November.

But overall, 2013 represented the best year for housing since the financial crisis. Once December's figures are released, home prices will likely have risen 11.5 percent last year, according to Mark Fleming, CoreLogic's chief economist. That would be the biggest gain since 2005.

And sales of existing homes should reach 5.1 million in 2013, the National Association of Realtors forecasts. That would be up 10 percent from the previous year and the most since 2006. It's still below the 5.5 million generally associated with healthy housing markets.

Most economists expect sales and prices to keep rising this year, but at a slower pace. They forecast sales and prices will likely rise around 5 percent, down from double-digit gains in 2013.

A measure of signed contracts suggests sales are already starting to level off. The Realtors' group said last week that its index of pending home sales ticked up slightly in November after falling for five straight months.

Economists blame higher mortgage rates for dragging down sales. The average rate on a 30-year mortgage rose last week to 4.53 percent from 4.48 percent the previous week, the third straight gain.

Rates jumped about 1.25 percentage points from May through September, peaking at 4.6 percent. That increase occurred after Federal Reserve Chairman Ben Bernanke indicated that the Fed would start to slow its bond-buying program before the end of the year. The purchases are intended to lower long-term interest rates and spur more borrowing and spending.

At its December meeting, the Fed said it would cut its $85 billion monthly purchases in January by $10 billion a month. Interest rates have risen since then, reflecting greater optimism about the economy and the impact of the Fed's move.

TRADE DEFICIT

The U.S. trade deficit fell in November to its lowest level in four years, an encouraging sign that economic growth in the final three months of the year was stronger than analysts had forecast.

Gains in energy production and stronger sales of American-made airplanes, autos and machinery lifted exports to an all-time high.

The trade gap dropped 12.9 percent in November to $34.3 billion, the Commerce Department said Tuesday. That's the lowest monthly trade deficit since October 2009.

Exports rose 0.9 percent to a record $194.9 billion. The gain was aided by a 5.6 percent rise in petroleum exports.

Imports dropped 1.4 percent to $229.1 billion. A decrease in demand for foreign oil offset a record level of imported autos.

A smaller trade deficit can boost economic growth. It typically shows that American companies are earning more from sales overseas, while U.S. consumers are buying fewer products from foreign companies.

Economists raised their growth forecasts for the October-December quarter after seeing the November trade report.

Jennifer Lee, senior economist at BMO Capital Markets, noted that the trade gap declined in both October and November. She is currently forecasting growth at an annual rate of 2.4 percent. But after the trade report she said growth could end up being stronger.

Paul Ashworth, chief U.S. economist at Capital Economics, said growth could be 3 percent or higher.

Through 11 months of 2013, the trade deficit is 12.3 percent lower than the same period in 2012. Exports have strengthened, while imports are slightly lower.

A domestic energy boom has boosted exports and lessened America's dependence on foreign oil. U.S. petroleum exports were up 10.8 percent through the first 11 months of 2013 compared with the same period in 2012. In that same period, petroleum imports have fallen 11.5 percent.

The drop in oil imports has been helped by lower global prices. After peaking at $102 per barrel in September, the average price of a barrel of imported crude oil has fallen and averaged $94.69 a barrel in November. Analysts are predicting the price of imported oil will decline further, noting ample supplies and a strengthening dollar

The U.S. deficit with China fell 6.7 percent in November from October to $26.9 billion. U.S. exports to China hit a record. The U.S. deficit with China, the largest with any country, is still on track to set another record this year.

The deficit with the European Union dropped 29.4 percent in November to $10.1 billion. That reflected a big drop in imports from that region, which offset a small dip in U.S. sales to Europe.

The overall economy grew at an annual rate of 4.1 percent in the July-September quarter. Much of that strength reflected a buildup in business stockpiles. Economists believe inventory building slowed in the October-December quarter, which could dampen growth.

Still, other data have been encouraging. The rise in exports has lifted factory output. And a stronger job market has made Americans more confident in the economy and led to more spending. Those factors could offset some of the drag from lower inventory growth.
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