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Auto Sales, Home Prices Help Buoy Weak US Economy

Stocks in this article: GM

Only 20 large cities out of 100 that CoreLogic tracked showed declines in the 12 months that ended in August. That compared with 26 in July.

Home prices are still 30 percent below their peak in June 2006, according to Case-Shiller. That was the height of the housing boom.

"The housing market's gains are increasingly geographically diverse, with only six states continuing to show declining prices," said Mark Fleming, chief economist for CoreLogic.

The six states with price declines are Kentucky, Connecticut, Alabama, New Jersey, Illinois and Rhode Island.

The auto and housing industries are benefiting from the historically low interest rates engineered by the Federal Reserve. The Fed last month launched a mortgage-bond buying program to try to drive down mortgage rates further. The average rate on a 30-year fixed-rate mortgage is already a record-low 3.4 percent.

Since 2008, the Fed bought more than $2 trillion in Treasurys and mortgage bonds to try to drive down long-term rates. Besides lower mortgage rates, lower long-term rates have led to cheaper auto loans.

Joseph LaVorgna, chief U.S. economist at Deutsche Bank, said housing and auto manufacturing are providing critical support for a still subpar economy.

And he pointed to a connection between the two: Rising home prices make homeowners feel more secure and more willing to buy expensive items such as cars.

"Housing is a lifeline," LaVorgna said. "We would be a lot worse off without it."

___

Krisher and Durbin contributed from Detroit. AP Business Writer Anne D'Innocenzio in New York also contributed to this report.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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