Chin Up in the Downswing


Chin Up in the Downswing: Home Prices Creep Back Up; Dollar General Sees Some Green; Economist Says Media Too Negative

March 24, 2009 05:15 PM
by Anne Szustek
Figures from the Federal Housing Finance Agency show home prices recovering during January. Discount chain Dollar General is booming during the recession and a Chicago economist says the financial media is being needlessly negative.

House Prices Back on the Rise

In a sign of possible recovery in the housing markets, prices of U.S. homes rose by 1.7 percent in January; according to statistics from the Federal Housing Finance Agency, this marks the first increase since February 2008. Home prices remained nearly flat during December 2008, declining only 0.2 percent. This shows a positive trend at the tail end of the 12-month period ending in January, during which prices of U.S. homes dropped 6.3 percent.

Thrifty Shoppers Turn to Dollar General

Discount retail chain Dollar General posted fourth-quarter 2008 earnings of $81.85 million, marking a 48 percent year-on-year increase from the fourth quarter of 2007. The store also posted a sharp y-o-y uptake in revenue: $2.85 billion during the quarter ending Jan. 1, 2009, 11.2 percent higher than fourth-quarter 2007. Dollar General, which has stores in 32 states, prices a significant portion of its inventory at or below $1. CEO Rick Dreiling said that business model is one reason why the store has weathered the recession so well, as well as streamlining the store’s distribution methods. “Importantly, we were able to achieve these improvements despite the increasingly difficult economic conditions,” Dreiling was quoted as saying by Nashville Business Journal. “We are pleased with the current momentum in our business, and we intend to focus on driving continued success in 2009.”

News Story on Chicago Skyscrapers Accentuates the Negative

In a Seeking Alpha post, University of Chicago economics professor Casey B. Mulligan points out that a Reuters article on Chicago skyscraper construction puts a negative spin on the data rather than the overwhelmingly positive conclusion that could be drawn. “Eleven percent of global skyscraper construction has been halted. I think that means that 89 percent continues. In the U.S., it's 10 percent halted and 90 percent is continuing.” Mulligan writes. He also notes that in Chicago, some of the skyscrapers slated for construction were residential complexes, and given that there’s a glut of housing on the Chicago market, construction in that sector should have slowed anyway. “It is remarkable that 90 percent of skyscrapers continue to go up,” he concludes.

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