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U.s. Economy: Home Prices Increase By Most Since 2005

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Home values in 20 U.S. cities climbed in July by the most in almost four years, helping stem the record plunge in household wealth that’s depressed spending.

The S&P/Case-Shiller home-price index rose 1.2 percent in July from the prior month, the biggest gain since October 2005, the group said today in New York. Another report showed consumer confidence unexpectedly fell in September, while holding above the record low reached earlier this year.

Home values are rebounding as low borrowing costs and government tax credits lift home sales. Combined with rising stock prices, the gains will begin to restore the $13 trillion plunge in net worth caused by the worst financial crisis since the Great Depression, a process that economists such as Brian Bethune say will take years to complete.

Home prices are “a major, major turning point for the economy,†said Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts. “We are eating away at the problem of household balance sheets.â€

The New York-based Conference Board’s consumer confidence index fell to 53.1 in September from 54.5 the prior month, the private research group said today, amid growing concern over the lack of jobs. The gauge sank to 25.3 in February, the lowest level in data going back to 1967.

The Standard & Poor’s 500 Index dropped after the confidence report, erasing earlier gains. The index was up 0.1 percent to 1,064.01 at 1:18 p.m. in New York. The yield on the benchmark 10-year Treasury note was little changed at 3.29 percent compared to 3.28 percent late yesterday.

Asset prices are making up for real wealth and the people have been fooled.

Absolute insanity, rising house prices are not productive for the economy yet the "groupthink" economists want the paradigm to return.

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That Avatar does you no favours at all. You need something with more gravitas. I would go back to your old one.

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