Wednesday, October 3, 2012

Car sales, home prices hint at US rebound


WASHINGTON - The United States economy is looking more resilient, thanks in part to encouraging signs for the two most expensive purchases most Americans make: Cars and homes.

Cheap loans and a bounty of fuel-efficient models enticed people to buy new vehicles at a brisk pace last month. And the nation enjoyed another on-year surge in home prices in August, a sign that the housing industry is making a sustained comeback.

Yesterday, car-makers reported solid increases last month, with total sales expected to exceed 1.1 million vehicles, up 11 per cent from September last year. Analysts expect sales to total about 14.3 million this year, up from 12.8 million last year. Sales peaked at 17 million in 2005 before hitting a 30-year low of 10.4 million during the recession in 2009.

Bargain loan rates are also fuelling sales. Some banks and credit unions are offering 2-per-cent financing to car buyers with good credit. Rates from some car-makers' finance companies are even lower.

Voter perceptions of the economy may also be affected by the steady rise in home prices, which coincides with higher sales fuelled by record-low mortgage rates. The gains could embolden people made nervous by their shrunken home values or wary of selling or investing in a home.

A gauge of prices calculated by CoreLogic, a private data provider, jumped by 4.6 per cent in August compared with August last year, the sharpest on-year gain in more than six years. The Standard & Poor's/Case Shiller index rose in July compared with a year ago, a second straight increase, and an index compiled by a federal housing regulator has reported annual increases.

But home prices are still 30 per cent below their peak in June 2006, the height of the housing boom, according to Case-Shiller.

The car and housing industries are benefiting from the historically low interest rates engineered by the Federal Reserve, which last month launched a bond-buying programme to try to drive down mortgage rates further. AP

Car purchases have been robust in part because people are replacing cars they kept during the recession. The average age of vehicles on US roads is nearly 11 years.



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