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Gift Cards, Last-minute Deals Boost Chain Store Sales

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WASHINGTON (1/2/14)--A measure of consumer spending ended the year on the up for the third consecutive week, according to a report released New Year's Eve.
The International Council of Shopping Centers' Weekly Chain Stores sales index increased by 1% for the week ending Dec. 28. The measure was also 3% higher on a year-over-year basis, and its four-week moving average was at 2.3%.
Boosting year-end sales were Christmas Eve discounts and record gift-card purchases. The proportion of retailers offering Dec. 24 promotions was higher in 2013--21% compared to 17% in 2012. Gift-card purchases also accounted for 23.7% of total holiday spending, which, Moody's analysts said, should prolong the holiday shopping season to the end of January ( Dec. 31).
The research firm's analysts pointed out that department stores had the largest gains, while electronics retailers' numbers were weak.
Weather, they said, wasn't much of a factor last week, with snow and ice only in parts of New England and the Midwest.
In 2013, retail discounts overall averaged 30%--an increase from 25% in 2012, according to Moody's, which expects 3% to 4% sales growth in December.

Monthly Increase in Home Prices Highest Since '06

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WASHINGTON and NEW YORK (1/2/14)--Home values in the U.S. increased in October at their fastest pace since the expansion of the housing bubble, but observers warned that the gains might be fleeting.
S&P/Case-Shiller Home Price Indexes for 10 and 20 cities were both up on a year-over-year basis by 13.6%, with each 0.3% higher than annual gains made in September, according to a report released Tuesday. Every metropolitan area that makes up the indexes showed home price appreciation on a year-over-year basis, with annual growth accelerating in 13 out of 20 regions. The national annual rise in home prices recorded by the measure was at its greatest since February 2006 ( Dec. 31), with the 10 and 20 city composites up on a monthly basis, by 1% and 1.1% respectively.
But Forbes analysts pointed out that price increases in 18 cities monitored by S&P/Case-Shiller either slowed down or reversed on a monthly basis in October (Forbes Dec. 31). Appreciation was only measured in 10 metropolitan areas, with Las Vegas topping the growth table at 1.2%. Nine cities--Atlanta, Boston, Chicago, Cleveland, Dallas, Denver, San Francisco, Seattle and Washington--saw monthly declines. Only Charlotte, N.C., and Miami recorded gains at a faster rate in October. The analysts also noted that September growth rates were slower on a monthly basis in all markets except one.
Declining and decelerating home values appear to be caused by deflationary pressure on the demand side of the market. Foreclosure inventories hit a multiyear low in November, signaling tight supply, with institutional investors having largely bought up distressed properties that flooded the market after the crash of 2008 ( Dec. 31). On the demand side, however, interest rates have increased over the past year causing the sales of previously owned homes to decline from September to November, according to the National Association of Realtors (Market News Dec. 20).
The average rate for a 30-year fixed interest mortgage was up by 38 basis points from the end of October to Dec. 26, and by 113 basis points on a year-over-year basis at the end of 2013, according to Bloomberg. The research and analysis firm said that this trend is expected to continue into 2014 with the Federal Reserve starting its $10 billion quantitative easing tapering this month.

The lull in demand, however, is itself showing signs of fading. The NAR reported that a leading predictor of future home purchases was up by 0.2% in November (Market News Dec. 31). Both Moody's and Bloomberg analysts predict that declining unemployment, and expanding income and consumer confidence will lift home values in 2014, although Moody's warned that rising interest rates remain a threat to demand, and that the acceleration of home prices will abate.