US home prices rise in May by most in 7 years

Tuesday, July 2nd, 2013 | Finance News

WASHINGTON (AP) — U.S. home prices jumped 12.2 percent in May from a year ago, the most in seven years. The increase suggests the housing recovery is strengthening.

Real estate data provider CoreLogic said Tuesday that home prices rose from a year ago in 48 states. They fell only in Delaware and Alabama. And all but three of the 100 largest cities reported price gains.

Prices rose 26 percent in Nevada to lead all states. It was followed by California (20.2 percent), Arizona (16.9 percent), Hawaii (16.1 percent) and Oregon (15.5 percent).

CoreLogic also says prices rose 2.6 percent in May from April, the fifteenth straight month-over-month increase.

Steady hiring and low mortgage rates have encouraged more Americans to buy homes. Greater demand, a limited number of homes for sale and fewer foreclosures have pushed prices higher. Prices are still 20 percent below the peak reached in April 2006, according to CoreLogic.

Sales of previously occupied homes topped the 5 million mark in May for the first time in 3 ½ years. And the proportion of those sales that were "distressed" was at the lowest level in more than four years for the second straight month. Distressed home sales include foreclosures and short sales. A short sale is when a home sells for less than what is owed on the mortgage.

Home sales are expected to increase in the coming months. That's because the number of people who signed contracts to buy homes rose in June to the highest level since December 2006. There's generally a one- to two-month lag between a signed contract and a completed sale.

One worry is that higher mortgage rates could slow the housing recovery. Still, rates remain low by historical standards. And increases in rates could boost home sales. That's' because many Americans may act to lock in the lower rates before they rise further.

A survey by the University of Michigan released last week found more Americans believe it is a good time to buy a home because both rates and prices are just starting to rise.

Rates have been trending higher for two months. And the average rate on a 30-year fixed mortgage leapt to 4.46 percent last week, according to mortgage buyer Freddie Mac. That's the highest in two years and a point more than a month ago.

Mortgage rates surged after Federal Reserve chairman Ben Bernanke said last month that the Fed could scale back its bond buying later this year and end it next year if the economy continued to strengthen. The bond purchases have kept long-term rates down.

Economists say that higher mortgage rates are unlikely to stifle the housing recovery. A more critical issue is whether potential buyers can get loans. There are signs that banks have become more willing to extend mortgages.

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Japan’s MUFG agrees to buy $5.61 billion stake in Thai lender

Tuesday, July 2nd, 2013 | Finance News

By Taiga Uranaka and Denny Thomas

TOKYO/HONG KONG (Reuters) - Japan's Mitsubishi UFJ Financial Group (MUFG) has agreed to buy a controlling stake in Thailand's Bank of Ayudhya Pcl for up to 560 billion yen ($5.61 billion) as Japanese lenders expand into fast-growing Southeast Asian economies to beat slower growth at home.

MUFG's purchase of up to 75 percent of Thailand's fifth largest lender would be the biggest acquisition by a Japanese bank in Southeast Asia. It also ends General Electric Co's six-year-old investment in Ayudhya, with GE raising $2.41 billion by selling its stake in the Thai bank in two tranches.

The deal requires approval from Thailand's finance ministry as foreign ownership in domestic banks is capped at 49 percent. MUFG told a briefing it believes Bangkok would "take a favorable view" and said it was considering merging its Thai operations with Ayudhya to comply with Thailand's single presence policy on bank ownership.

MUFG has sizable operations in Japanese corporations in Thailand, where Toyota Motor Corp and other conglomerates own manufacturing plants.

Under the terms of the deal, MUFG will make a tender offer priced at 39 baht per share, allowing GE to sell its entire 25.33 percent stake in the Thai bank. Thailand's Ratanarak Group, which founded the bank in 1945, has agreed to retain a 25 percent stake in Ayudhya.

MUFG is paying a price-to-book ratio of 2.02 times for March 2013, which represents a 46 percent premium to the average P/B ratio of Thai banks, according to Thomson Reuters data.

The tender offer is expected to start in early November and end in December, the statement added.

GE's sale of its stake in Ayudhya is being closely watched by ING , which is also preparing to offload its 31 percent stake in Thai lender TMB Bank plc .

APPETITE FOR SOUTHEAST ASIA

MUFG's acquisition of Ayudhya comes less than two months after rival Sumitomo Mitsui Financial Group's bought a $1.5 billion stake in Indonesia's Bank Tabungan Pensiunan Nasional Tbk PT .

Japanese banks and insurers have this year launched deals worth $8.15 billion in Southeast Asia, attracted by the region's strong growth prospects, but their operations have been mostly limited to corporate banking. MUFG's acquisition of Ayudhya marks its first foray into Asian retail banking outside Japan.

GE acquired a roughly 33 percent holding in Bank of Ayudhya in 2007 for 22.3 billion baht, or $626 million based on the exchange rate at the time. It recouped most of its investment when it sold a 7.6 percent stake for $466 million in September.

MUFG was one of several bidders for GE's stake, but sources said the Japanese lender was the most aggressive and had also won the support of the Ratanarak Group.

Morgan Stanley advised GE, while Bank of America Merrill Lynch advised MUFG, sources told Reuters. ($1= 99.7450 Japanese yen)

(Additional reporting by Khettiya Jittapong; Editing by Miral Fahmy)

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Chrysler’s U.S. sales in June rise 8 percent

Tuesday, July 2nd, 2013 | Finance News

DETROIT (Reuters) - Chrysler's U.S. sales in June rose 8 percent on strong demand for its two best-selling vehicles, the Ram full-size pickup truck and Jeep Cherokee SUV, the company said on Tuesday.

Chrysler Group LLC, majority-owned by Italy's Fiat, reported U.S. sales last month of 156,686 vehicles, in line with analysts' expectations and the company's best June results since 2007.

Overall U.S. auto industry sales in June are expected to show a rise of up to 8 percent and could reach their strongest monthly pace since before a recession pushed Chrysler and General Motors into bankruptcy in 2009.

Economists polled by Thomson Reuters expect an annual sales rate in June of 15.4 million vehicles. Several analysts and research firms who follow the auto industry closely anticipate a rate of 15.5 million to 15.7 million.

Chrysler falls in the optimists' camp as it expects a sales pace in the month of about 16 million vehicles, including medium and heavy trucks. Those vehicles typically account for about 300,000 sales annually.

"The fundamentals for continued industry gains in new-vehicle sales remain intact," Chrysler U.S. sales chief Reid Bigland said in a statement.

Monthly sales are seen as an early indicator of the U.S. economy's health. The auto industry has held up better than the broader economy as easier credit availability and pent-up demand for vehicles have driven demand.

In May, U.S. auto sales rose more than expected as construction workers and oil drillers bought more pickups to meet growing demand for their services, a trend major automakers expect to continue through the rest of the year.

(Reporting by Ben Klayman and Bernie Woodall in Detroit; Editing by John Wallace)

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