TIME Economy

U.S. Economy Slows to a Crawl in First Quarter of 2014

A trader works on the floor of the New York Stock Exchange at the end of the trading day in New York, April 25, 2014.
A trader works on the floor of the New York Stock Exchange at the end of the trading day in New York, April 25, 2014. Justin Lane—EPA

Cold weather froze the U.S. economy in its tracks during the first quarter, with GDP falling to just 0.1 percent to mark the slowest quarter since 2012

The U.S. economy slowed dramatically in the first quarter of 2014, as severe winter weather across much of the country depressed business investment and home construction.

The economy’s meager 0.1% GDP growth in January, February and March represented the slowest three-month growth in the economy since the end of 2012, and a sharp deceleration from growth in the second half of 2013, when the economy grew at a 3.4% rate.

The data reported by the Commerce Department early Wednesday fell far short of the expectations of Wall Street economists, who had predicted a 1.2 percent rate of growth this quarter, the New York Times reports.

Consumer spending, the biggest driver of economic growth in the United States, actually grew 3.0 percent in the first quarter, nearly consistent with 2013’s fourth quarter growth of 3.3 percent. But nonresidential investment decreased dramatically, as did did exports of goods and services.

Republicans were quick to blame the Obama administration for the first quarter’s measly growth. “This report is more than a low number,” said Brendan Buck, the spokesman for Speaker of the House John Boehner. “It is a reflection of the real economic despair that persists in the sixth year of the Obama presidency.”

Economists said the figures were disappointing, but expect the economy’s growth rate to return to between 2.5 and 3 percent in 2014, the Times reported. Analysts were in agreement that much of the hit in the first quarter was due to inventory growth in the end of 2013 and seasonal factors.

“We do not take this report as a serious representation of the state of growth in the economy,” John Ryding and Conrad DeQuadros of RDQ Economics said, according to the Wall Street Journal. “We believe that real growth will run ahead of 3% over the balance of the year.”

Tim Hopper, chief economist for the financial services company TIAA-CREF said the “recovery is still on track” despite the poor quarter. “While the 0.1% increase in first quarter GDP does not look very good at first, a deeper dive into the report shows that the underlying economic fundamentals are still relatively positive,” Hopper added.

TIME finance

U.S. Set to Bring Criminal Charges Against Banking Giants

Federal prosecutors are reportedly preparing to file charges against Credit Suisse and BNP Paribas, defying the notion that Wall Street giants are "too big to jail"

Federal prosecutors are reportedly close to bringing criminal charges against two of the world’s biggest biggest banks, Credit Suisse and BNP Paribas, preparing the way for what could be the first guilty plea from a major bank in decades.

The New York Times, citing anonymous sources, reported that prosecutors have outlined plans to charge French bank BNP Paribas for doing business with countries that are on the United States’ sanctions list, such as Sudan. A federal investigation into Credit Suisse for offering tax shelters to Americans could also yield a guilty plea.

The new focus on bringing criminal charges against major banks bucks a regulatory trend in Wall Street, whose largest institutions have been largely immune to criminal prosecutions over wrongdoing for two decades. The planned prosecutions against BNP Paribas and Credit Suisse could help mollify public outrage over banks’ apparent immunity to criminal charges.

BNP Paribas said Wednesday that it may end up paying much more than the $1.1 billion it has set aside for alleged U.S. sanctions violations in the face of planned criminal charges, the Wall Street Journal reported. The French bank, which has a huge investment arm in the United States, allegedly did business with countries including Iran, Sudan and Cuba.

In the past, prosecutors have hesitated to bring criminal charges against major banks for fear of putting them out of business and damaging the economy. But prosecutors have met with regulators to discuss strategies to criminally punish banks like BNP and Credit Suisse and at the same time make sure their charters aren’t revoked.

Past investigations into major Wall Street banks like JPMorgan for its ties with Bernie Madoff’s massive fraud scam, and HSBC, accused of “stunning failures” in preventing money laundering, have yielded multibillion-dollar fines, but no criminal charges.

In a recent speech, however, Preet Bharara, the U.S. Attorney in Manhattan warned of coming criminal prosecutions. “You can expect that before too long a significant financial institution will be charged with a felony or be made to plead guilty to a felony, where the conduct warrants it,” he said.


TIME Economy

China Could Overtake the U.S. as the World’s No. 1 Economy This Year

A worker walks past a steel factory in Beijing
A worker walks past a steel factory in Beijing on April 1, 2013 Kim Kyung Hoon—Reuters

New data from the World Bank suggests China could surpass the U.S. as the world’s biggest economy as early as this year, a day that was always meant to arrive after China began its quest for wealth in the 1980s, but it will just veil the reality of its economic weaknesses

China’s economy is catching up to the U.S.’s much more quickly than anticipated. That’s according to a new report from the International Comparison Program of the World Bank.

The study recalibrates GDP statistics based on updated estimates of “purchasing-power parity” — a measure of what money can actually buy in different economies. In the process, the economy of China comes out far larger than we had previously thought. Its GDP surges to $13.5 trillion in 2011 (the latest year available), compared with the $7.3 trillion calculated using exchange rates. That catapults China’s economy much closer to that of the U.S. — at $15.5 trillion. Forecasting ahead, these figures show that China could overtake America as the world’s largest economy as early as this year.

This day, of course, was always going to arrive. The ascent of China to the world’s No. 1 slot has been inevitable ever since the country embarked on its great quest for wealth in the 1980s. With a population heading toward 1.4 billion, the question has been when, not if, China will topple the U.S. from its lofty perch. Still, we can’t ignore the historic significance of that switch. The U.S. has been the globe’s unrivaled economic powerhouse for more than a century. The fact that China will replace the U.S. at the top is yet another signal of how economic and political clout is rapidly shifting to the East from the West.

That quickly gets everyone’s passions boiling over. To many Chinese, becoming No. 1 is vindication for what they feel has been two centuries of humiliation at the hands of an aggressive West and proof that its authoritarian, state-capitalist economic model is superior to the democratic, free-enterprise systems of the U.S. and Europe. In the U.S., losing the top spot is seen as a symbol of America’s decline on the world stage.

Yet we shouldn’t get ourselves too worked up. These new figures don’t mean as much as many people think. Leaving aside the obvious statistical questions the report raises about the value of GDP figures generally, where the U.S. and China rank misses the more important point: bigger isn’t necessarily better.

Even if China does become No. 1, that would just be a mask covering up the reality of the economy’s weaknesses. Some of the factors that have been driving GDP upward are also signs of China’s deteriorating economic health — investment in excess capacity, the construction of wasteful real estate projects and the buildup of crazy levels of debt. China is losing its cost competitiveness but still lags badly in the managerial expertise, technology and financial professionalism necessary to develop a truly advanced economy.

Beijing’s leadership is embarking on an ambitious program of reform to make the state-led economy more market-oriented and give private business greater sway. But the challenges of implementing these reforms are huge and could cause a dramatic economic slowdown, or even worse. Many economists and analysts (myself included) have openly wondered if China is heading toward a full-blown financial crisis.

On the flip side, if the U.S. slips from its No. 1 position, it doesn’t spell doom. The U.S. still has a substantial lead in innovation, and its dominant position in many industries and sectors is not about to vanish. New York City will remain the world’s premier financial center, and the dollar will reign supreme on the world stage for some time to come. Still, wherever the U.S. ranks, its economy too is badly in need of reform. Better infrastructure, a smarter tax code, an improved education system and more determined efforts to close the income gap would also strengthen the economy’s foundation for growth.

So we shouldn’t get too stuck on who is No. 1 and who isn’t. Ultimately it’s what you do with your economy, and not its size, that matters.

TIME Retirement

3 Generations, 3 Paths to the Retirement Poorhouse

Every working generation has a unique plan for retirement. Will any of them get there?

Banks and mutual fund companies pump out surveys and data points every day to illustrate the retirement income crisis in America. They want to make sure you don’t forget to save and invest—with them. But they have little to fear. It’s not like this crisis is going away anytime soon.

Every working generation is getting some part of the retirement security equation wrong. Boomers plan to work longer—but they aren’t keeping current on skills. Gen X is socking away cash in 401(k) and similar plans—but they are borrowing too much from those very accounts. Millennials have become dedicated savers and asset gatherers—but they spend too much and aren’t doing enough about their crushing student debts.

These are broad conclusions drawn from recent surveys. The most pointed conclusions come from the newly released 15th Annual Transamerica Retirement survey, which found that the effects of the Great Recession continue to weigh on all generations and are leading them down distinct savings paths.

Boomers Born between 1946 and 1964, the youngest are now turning 50. Boomers are first-generation Guinea pigs as it relates to the new retirement model. Many were mid-career when traditional pensions gave way to 401(k) plans. They haven’t had 40 or 50 years to stuff the new plans with cash and let compound growth do the heavy lifting. The lucky ones still qualify for traditional pensions. But this is a famously under-saved demographic with a median nest egg of just $127,000.

More than a third of boomers say Social Security will be their primary source of retirement income, up from a quarter before the recession, Transamerica found. Just one in five plan to not work at all in retirement. Yet staying at work isn’t always possible. Less than half are keeping job skills up to date and only one in seven are scoping out job opportunities or networking for employment. Meanwhile, just 21% of employers have programs to help older workers scale back at work. Health issues also prevent older people from staying at work as long as they may like.

Gen X Born between 1965 and 1978, this was the first generation to enjoy access to 401(k) savings and growth for nearly all their working years. Nearly all of them—91%—highly value these plans and 84% of those who are eligible participate in their company plan. Unfortunately, this group treats the 401(k) like a piggy bank: 27% have taken a loan or early withdrawal from the plan. In doing so they often incurred taxes and penalties, which on top of lost growth set their savings goals back further.

Gen Xers estimate they will need $1 million to retire, Transamerica found. Their median savings to date: $70,000. The oldest are just turning 50. So they have time if they begin to power save 20% or so of income. But nothing will help if they keep robbing the kitty. “Simply put, 401(k) loans are a wolf in sheep’s clothing,” say Catherine Collinson, president of Transamerica Center for Retirement Studies. “Everyone should know that it’s best to say no to 401(k) loans.”

Millennials Born after 1978, this huge generation about 80 million strong is a budding group of super savers that have heard the message about saving early and often. Seven in 10 are saving for retirement and began at the median age of 22. Millennials participating in a company-sponsored plan that features a match are socking away an impressive 10% of their salary.

Yet while the asset side of their ledger is encouraging, the liabilities side is frightening. More than half of college-educated Millennials owe student loans; 41% have a mortgage (many for greater than their home’s value) and another 41% have auto debt, according to a report from TIAA-CREF Institute. They are also neck-deep in credit card debt. So they’re saving, but their net worth isn’t necessarily rising. To an extent, this generation knows what it doesn’t know; 73% crave more financial information from their employer. Let’s hope they get it, because this a generation without financial safety nets—but ready to do what it takes to build retirement security over the long haul.



TIME Earnings

Twitter’s Stock Slumps Despite Adding New Users More Quickly

Twitter added more active users and generated more revenue during the first quarter than analysts had expected, but that wasn't enough to stop its stock from tumbling in after-hours trading on Tuesday following its first quarterly earnings report as a public company

Twitter is finally adding new users at a faster rate, but still not fast enough to appease wary investors. The company’s stock tumbled more than ten percent in after-hours trading Tuesday after its quarterly earnings report failed to impress Wall Street.

Twitter generated $250 million revenue for the quarter, a 119% increase year-over-year that easily topped analyst expectations. Adjusted earnings were $37 million and net income minus certain items was $183,000, netting zero cents per share. Analysts had been expecting a loss of three cents per share.

The better-than-expected earnings numbers, however, couldn’t stop a Tuesday afternoon slide in Twitter’s stock. The company’s shares have fallen more than 40 percent from their high at the start of the year as investors grow increasingly worried about the network’s growth rate. The social network added 14 million new monthly active users in the first quarter of 2014, rising to a total of 255 million. That’s better than the paltry nine million Twitter added in the fourth quarter of 2013, but still not enough to inspire confidence that the social network has the growth prospects of a Facebook (1.3 billion users) or a WhatsApp (500 million users).

Total timeline views, a measure Twitter uses to measure engagement, rose to 157 billion in the quarter, an increase of 9 billion from the previous quarter. The average number of timeline views per monthly active user increased slightly, to 614. However, both figures are down significantly from a year ago. Twitter attributes the drop to a change in its interface that allows users to follow conversations without having to scroll through unrelated tweets.

Monetarily, Twitter looks poised for increased success in 2014. The company is now generating $1.44 per 1,000 timeline views, nearly double the figure a year ago. A bevy of new ad units, including ads that allow people to install new apps, will boost revenue, as will the scaling of MoPub, Twitter’s ad network that will allow it to help marketers place mobile ads around the Web.

But investors are looking for growth in members and usage now, not profits. “The metrics surrounding user engagement matter more to the stock than the financial performance, in our view,” Stifel analyst Jordan Rohan wrote in a note to investors. “We view monetization improvements as secondary.”

In a conference call with investors, CEO Dick Costolo again emphasized that Twitter’s plan to become more accessible to new users is a work in progress. The company has already rolled out some dramatic changes, like an overhaul of profile pages to make them more similar to Facebook’s, and Costolo said there are more tweaks coming this year. He pointed out that retweets and favorites increased 26 percent quarter-over-quarter. He also noted that the Oscars generated 3.3 billion tweet views in the 48 hours after the show across the Web, proving Twitter’s scale. “Twitter as a platform, we believe is already incredibly mainstream,” he said. “Now what we need to do is help that world of users who already experience Twitter every day understand the increased value of the logged in experience.”

With each passing quarter, though, Wall Street’s view of Twitter’s growth prospects seems to grow a bit dimmer. “Twitter may never get as big as Facebook,” says Gartner analyst Brian Blau, “but as long as they can continue to find, attract and gain a loyal user base the foundations of the company will remain solid.”


The Donald Sterling Fine Calculator

Let's say you own a basketball team and your ex-girlfriend caught you talking like an irrepressible racist. How much would you owe the NBA? Use our calculator to find out

On Tuesday afternoon, embattled Los Angeles Clippers owner Donald Sterling was banned from the NBA and fined $2.5 million. That’s 0.001 percent of his reported $1.9 billion net worth. Ask and you shall receive, Nieman Lab’s Joshua Benton.


Frontier Airlines Is About To Get A Lot More Cranky Flyers

The company is now charging for every little thing when you fly. Turns out that may be the way to become the most profitable airline in the industry

When an airline proclaims that it is simplifying its fare structure, you can pretty much count on being confused for awhile. So let’s take a look at Frontier’s new fare and fee structure, part of the carrier’s transformation into an ultra low cost carrier (ULCC). Frontier announced that is reducing its fare options from three to two—Economy and Classic Plus—for all tickets purchased after April 28. The company says it’s lowering base fares an average of 12%, but it’s also adding a fee to store a bag in the overhead bins. Frontier already charges for checked bags. (You are still allowed to bring one personal item, a brief case or purse for instance, that can fit under the seat. )

That does seem simple enough, but if you buy a ticket online, want to select your own seat, and check a bag or place one in the overhead, there are dozens of possible combinations of fares, fees and seats, depending on whether you are member of Frontier’s loyalty program or not. If you want a seat with extra room, which is what Classic Plus stands for, that’s another calculation. The bottom line is that you can pay $20, $25, $35 or $50 for a carry-on, while the opportunity to choose a seat will add $3, $5, $8 or $15 to the ticket cost. Simple enough for you?

In the airline industry, this is known as unbundling, which has had a lot of passengers grumbling about the homework they now have to do to buy an airline seat. The industry’s view: deal with it. “With an unbundled product, customers can save even more by choosing to pay for only the products that they want, allowing them to customize their flight experience for each and every flight,” said David Siegel, CEO of Frontier Airlines in a statement.

If Frontier’s new fare and fee structure looks a lot like the one at Spirit Airlines, the resemblance is entirely intentional. Last December, Republic Airlines sold Frontier to Indigo Partners LLC, one of the prime investors behind Spirit. William Franke, Indigo’s co-founder and managing partner, was chairman of the board of Spirit; he resigned from that post after selling his firm’s stake in Spirit.

Frontier is completing its transformation into an ULCC, as to opposed to Low Cost Carriers (LCCs) such as Southwest and JetBlue or network carriers such as American and United.

The idea behind ULCCs is to strip the product into its essential parts—a seat to a destination being the most basic– and then allow you to pick and pay for what you want while at the same time driving down costs. You want to select your seat? Pay for the privilege or take what we give you. You want peanuts? Pay for them because if there’s a cost there has to be a way to cover it. Spirit ‘s passengers pay an average fare of $79.43 before taxes, which is very low, but then spend another $53.84 on the extras. No wonder Frontier wants to mimic Spirit. The unbundled, low-cost approach has made Spirit the most profitable airline in the industry with a 17.1% profit margin vs. Delta’s 7%.

It has not, however, necessarily made Spirit the most popular. The carrier leads the league in complaints per 100,000 passengers according to a recent analysis by the Public Interest Research Group. And Frontier can expect a lot of unhappy travelers during its transition to ULCC as they wander up to the gate with a roll-on expecting to stow it gratis. It’s already happening. According to PIRG: “Frontier saw a large jump in 2013, becoming the most complained-about airline in the group besides Spirit Airlines.”

Despite the cranky customers, ULCCs such Spirit, Allegiant and now Frontier are gaining market share because they understand that to big segment of the flying public price is everything. Where the ULCCs have come up short is in educating consumers in what they are giving up—or paying extra for—to get a low fare. Some passengers still seem to think they can have it both ways. They can complain about it all they want, but those days are over.

TIME Airlines

As Hated Airline Fees Spread, the Original Fee-Crazed Carrier Changes Course

Frontier Airlines is following the low-fare, fee-heavy “charge for everything” lead set by Spirit Airlines. Is it inevitable more airlines will do the same?

On Monday, Denver-based Frontier Airlines announced that it would start charging for carry-on bags, with a new fee structure calling for $20 to $50 per bag that passengers who’d like to enjoy the privilege of using the overhead bin. The new fee is part of a broader push to follow the ultra low-fare (and ultra profitable) model established by Spirit Airlines, which also charges for carry-on bags, among many, many other things.

“We are basically reducing the fare and then will charge for everything else the customer may want a la carte,” said Frontier CEO David Siegel, via the Denver Post. “We say Spirit is the dollar store and they aspire to be Walmart. We say we are Target, offering really good value for your money.”

It’s not just Frontier that likens Spirit Airlines to a dollar store. Spirit itself has embraced the “dollar store of the sky” as a nickname.

Another nickname adopted by Spirit has been the “Ryanair of the U.S.” Spirit executives have admitted they “flat-out copied” the fees and policies employed over the years by Ryanair, the largest low-fare carrier in Europe.

If there’s anything Ryanair is known for more than low fares, however, it’s the ruthless nickel-and-diming of its customers, combined with abrasive, headline-grabbing sound bites regularly offered to the media by CEO Michael O’Leary. This is a man who has threatened to install pay toilets on planes, and who called passengers “idiots” if they don’t take steps in advance to avoid Ryanair’s most egregious fees.

What’s scary to travelers who loathe the nasty, nickel-and-dime model is that this approach is clearly spreading. Ryanair was copied by Spirit, which in turn has been copied by carriers such as Allegiant Air (which added carry-on fees in 2012) and, now, Frontier Airlines. Meanwhile, it’s become standard across the industry to charge for basic “services” like ensuring you’ll be able to sit next to your child or spouse on the plane.

Is it inevitable that all airlines will continue down this path, so that we’ll all one day be flying on some “charge for everything” Spirit-Ryanair imitator? Maybe not.

In fact, even as more airlines seem to be using Ryanair as a model, Ryanair itself is desperately trying to combat its reputation for rip-offs and poor service. Ryanair’s O’Leary explained to the BBC in early April that it has been instituting a wide range of service improvements, including a supposedly quicker, easier-to-navigate website and more customer-friendly seat reservations and baggage policies and fees. The airline also recently started advertising on TV for the first time, with a series of commercials aimed at changing its image.

Surely, part of the motivation for Ryanair’s moves has been pushback from passengers. In a recent traveler survey, Ryanair didn’t even make it into the top five budget airlines serving the UK. Previously, Ryanair has been named by consumers as the worst brand in Europe across all industries, and participants in the survey described the airline’s service as “aggressive and hostile towards customers.”

Like its forefather, Spirit Airlines is also routinely bashed by consumers. Last fall, a Consumer Reports study on U.S. airlines ranked Spirit dead last, and noted that Spirit doesn’t stand out merely as a bad airline. “Spirit Airlines received one of the lowest overall scores for any company we’ve ever rated,” the report stated.

More recently, Spirit was named the “most complained about airline” in the world, displacing Ryanair as the year-in, year-out titleholder. The results of a poll at Airfare Watchdog also just indicated that Spirit has by far the rudest airline attendants in the U.S.

And this is the airline that many in the field are trying to imitate?

TIME Media

Spotify Aims for U.S. Expansion Through Sprint Deal

Sprint customers will be able to take advantage of lengthy free trials and discounted subscriptions to the streaming music service, in a deal that could see Spotify broaden its user base

Spotify has finally nailed down a key partnership that could help it reach a larger audience in the United States. The music streaming service announced today that it is offering extended free trials and discounted subscriptions to Sprint customers.

All of Sprint’s nearly 30 million postpaid customers will qualify for a three-month free trial to Spotify. Customers on Sprint’s multi-line “Framily” plans will get six months of free Spotify, then pay a discounted rate of $7.99 per month or $4.99 per month depending on how many people are on the plan. Spotify regularly costs $9.99 per month.

Partnerships with telecoms providers are a holy grail of sorts for streaming services, which are used heavily on mobile devices. With the Sprint deal, Spotify will be able to slide its fees directly into customers’ cellphone bills, making for a more seamless payment process. The deals are also an opportunity for exposure to a broader market of customers who may not be familiar with on-demand streaming apps. Beats Music, for instance, launched a high-profile campaign with AT&T earlier this year that offers discounts to AT&T’s wireless subscribers and features television commercials with stars like Ellen DeGeneres and Run-DMC.

Spotify remains the leader in the music streaming space, with recent reports indicating that its paying subscriber base is approaching 10 million. Beats, a similar service from Dr. Dre and Jimmy Iovine, is the newcomer with the deepest pockets and the highest pedigree. However, the service is reportedly off to a modest start since its January debut, with Billboard reporting a subscriber count in the “low six-figures.”

The Sprint deal takes effect online on May 2 and in stores on May 9.



Housing Price Gains Slow, But Still Up Double Digits

As expected, housing price gains slowed this month as reflected by the S&P/Case-Shiller index.

The 20-city composite, an index of major metropolitan areas from Atlanta to Washington, D.C., rose 12.9% year-over-year for the month ending in February. That healthy double-digit gain would cause optimism anywhere but in the world of housing prices, where it reflects a deceleration from the 13.2% increase clocked for January.

What’s more, the slowdown is expected to continue for the next few months. The question the data poses is whether this easing of speed is worrisome or not.

David M. Blizter, the chairman of the committee that releases the indices, sounded downbeat in a release, noting that “the annual rates have cooled the most we’ve seen in some time.” Blitzer cited weakness in housing starts and the fact that housing prices have not made it back to 2005 levels as two indicators of the lukewarm temperature of the market.

As someone who was wearing snow boots only a month ago, I’d say that there’s a factor being overlooked — the Winter That Would Not Quit. Housing data will probably continue to look weak (or weaker, since a 12.9% jump is nothing to sneeze at) for the next couple of months as it reflects a market where consumers had to trudge through muck to make their home purchases.

The delayed spring in much of the country could explain the softness in housing starts too, so — in an attempt to take some of the drama out of the data — let’s take a look at three other factors:

  • Mortgage rates. Despite the threat of Fed tapering, rates have been fairly consistent for a few months at around 4.5%. While there’s no discount for consumers taking smaller mortgages to buy starter homes, last week’s rates of 4.49% for small loans and 4.41% for jumbo loans aren’t likely to scare any consumers away. (Though an increase in the upfront payments, known as points, to get those loans bears watching. Points paid for a jumbo went up from .18 to .34 according to the Mortgage Bankers Association, which surveys rates nationally).
  • Weakness from peak. Taken in aggregate, housing prices have been around 20% below their highs of Spring/Summer 2006. (“Spring/Summer” is used because some localities peaked at different times than others). However, as TIME’s Rana Foroohar has noted, there’s a difference between top markets and the rest of the country, with higher priced-markets performing better. Still, every single city in the Case-Shiller 20 showed a year-over-year increase in prices, ranging from Cleveland (up 3.0%) to Phoenix (up 12.5%) and Seattle’s (12.8%) to highest-flyer Las Vegas (up 23.1%).
  • Dearth of inventory. This may be the real X factor behind how the 2014 turns out. Monday’s release from the National Association of Realtors noted that the Pending Home Sales Index, an indicator based on contract signings, rose 3.4% from February to March, but noted “ongoing inventory shortages in much of the U.S.” A lack of homes can lead to the existing homes being fought over — and their prices bid up — by potential buyers, but it isn’t a component of a broad-based real estate recovery.

The most interesting city to watch may be one in middle America. Chicago, up 10.8% year over year, was down 0.9% from January to February, according to Case-Shiller, but it looks like the city’s March numbers, as reported by local realtors, are up. The Illinois Association of Realtors noted that the median price for homes (which includes both single-family houses and condos) in the city of Chicago was $237,000, versus $187,000 a year previous. Mary Ellen Podmolik, writing in the Chicago Tribune, notes “buyers are vexed by a shortage of inventory that means there is little time to sleep on the decision to make an offer on sought-after properties.” Keep your eye on Chicago for the next few months, and see if more inventory — and more sales — are generated, and how prices move. That may be a bellwether for real estate throughout the nation.

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