Major CPI Increase

Stocks made a very fast, very steady increase in values today, ending up 277 points. Everything is right in the garden. Oh so you think.

Bonds crashed today as interest rates increased, as inflation raised its ugly head in an unmistakable, and real way.

Oil and gasoline continued their fall, and encouraged stocks to continue their rise, and gold finally had some profit taking.

In the news today…..

The Consumer Price Index (CPI) was up an earthshattering 1.1% in June (or if you multiplied by 12, that’s about 13% per year increase), and in reality is 5% higher than one year ago. The June increase was the highest increase since 1982 – and that should make you think about how big June actually was.

Southern California had some bad news. It turns out that 41% of homes sold in So. Cal. are foreclosures. Prices have fallen in the big 6 counties of So. Cal. by 29.3% in the last 12 months.

Here are today’s numbers:
Dow Jones 30 Industrial – 11,239 (up 277 points)
10 Year Treasury Bond - 3.93% (up 0.09%)
Euro - $1.5825
Gold - $963 (down $16)
Oil - $134.80 (down $4.14)
Gasoline - $3.28 (down $0.11)

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This entry was posted on Wednesday, July 16th, 2008 at 5:45 pm and is filed under U.S. Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

2 Responses to “Major CPI Increase”

Amy Salisbury on July 17th, 2008 at 7:49 am

Hi Tom and Cy,
Regarding the real estate market in So. Cal: “41% of homes sold in So.Cal are foreclosures.”

Does that mean that 41% of the homes that have been sold in the past have now been foreclosed on, or that currently, 41% of homes being sold are foreclosed properties?

Here in the Eastern Panhandle of West Virginia, we have neighborhoods where there are ONLY foreclosures/short sales on the market. But there are lots of homes that aren’t on the market in those same neighborhoods.

So, obviously the percentage of homes being sold in those neighborhoods that are foreclosures is huge. There just aren’t regular resales for buyers to purchase.

Thanks in advance for the clarification and many thanks to you for your interesting columns! I’m learning a lot!

Amy Salisbury
Realtor/Owner
Leading Edge Properties
Charles Town, WV
Tom Harvey on July 17th, 2008 at 8:36 am

Hi Amy,

I am not 100% certain, but i believe that the 41% figure refers to houses that are SOLD in So Cal, and that were previously either foreclosed to REO or pre-foreclosures and then sold. Either way they would have been “foreclosed” in a loose sense of the meaning. It certainly implies that the price was significantly reduced compared to “market value.”

In your case, it sounds like “market value” is equal to the price being paid for “foreclosed” properties - so that’s not fun for anyone wanting to sell their house outside of the foreclosure market.

The 41% is big news in california because it just isn’t normal, and people are used to increasing prices, and high prices. I remember going to some of the beach communities south of the airport, and seeing that the median price of all houses in the town was over $1M - that was a shock since most houses were a long way from the water, and in fact, none of them were on the water.

Sounds like you can get some good buys in Charles Town. My recommendation would be to only consider properties that definitely, easily cash flow as rentals, and be very picky about getting ones that have low maintenance now and in the future.

All the best,
Tom