Home-Price Declines Accelerate
Consumer Confidence Rises Slightly
July 29 2008 - The S&P/Case-Shiller home-price index, a closely watched gauge of U.S. home prices, show price declines continued to worsen in May, with every region measured showing year-over-year drops for the second straight month.
Separately, consumers’ take on the economy stagnated in July, although there was some sign moods may be improving over the economy’s longer run prospects, a report Tuesday said.
According to the S&P/Case-Shiller indices, home prices in 10 major metropolitan areas fell by a record 17% from a year earlier and 1% from April. In 20 major metropolitan areas, home prices dropped 16% from a year earlier — another record drop — and 0.9% from April.
Seven areas managed to avoid price declines for the month, with the Boston, Charlotte, Dallas and Denver regions all posting 1% increases. Charlotte and Dallas are the only areas to have three consecutive months of month-to-month growth. Boston, Portland and Denver have had two straight months of increases.
Year-over-year, Las Vegas and Miami were again the weakest markets, each posting 28% declines. They were also the worst performers month-to-month, with Las Vegas down 2.9% and Miami dropping 3.6%.
David M. Blitzer, chairman of Standard & Poor’s index committee, noted home prices have been dropping by the indices’ measurements since August 2006. As prices swoon in the Sun Belt, where they had surged the most during the bubble, he noted the Northeast is “cyclical but less volatile” and the Midwest is facing “difficult local economies.”
Last week, the National Association of Realtors said existing-home sales resumed falling in June after a reprieve in May. June home resales slid to a 4.86 million annual rate, down 2.6% from May’s pace, while the median home price dropped 6.1%.
Meanwhile, The Commerce Department said last week that new-home sales fell 0.6% in June to 530,000. In May, sales fell 1.7% to 533,000. The decrease in June sales was the fifth in six months. But the Commerce Department said inventories kept receding, which is a promising sign. Bloated inventories have been depressing prices and construction.
Consumer Confidence Edges Up
The Conference Board said its July index on consumer confidence moved up slightly to 51.9, from a revised 51.0 in June. The July reading was slightly better than the 51.0 reading that was the expectation of forecasters.
The Conference Board’s present situation index was nearly unchanged at 65.3, from 65.4 the month before. Hopes for the future saw some improvement, with the expectations index improving to 43.0, from a revised 41.4 the month before.
Consumers’ view on the economy suggests “there has been no significant improvement, nor significant deterioration, in business or labor conditions,” said Lynn Franco, director of the private research group’s Consumer Research Center. “While consumers remain extremely grim about short-term prospects, the modest improvement in expectations, often a harbinger of economic times to come, bears careful watching over the next few months,” she said.
The Conference Board report arrives at a time of considerable consternation over the state of the U.S. economy in the face of job losses, stagnant growth, rising oil prices and deep trouble in the housing sector, along with repeated dislocations in the financial sector. Consumer confidence reports have been carving out some of their lowest readings in decades as consumers react to this current environment.
The nearly flat performance of the July Conference Board index comes after last Friday’s unexpected rise in the Reuters/University of Michigan July consumer sentiment survey. Economists attributed that improvement largely to the recent drop in oil prices coupled with government actions to shore up the foundations of the mortgage market.
The Conference Board survey is based on the mail in-responses of 5,000 households, and it had a cut-off date for responses of July 22.
Home-Price Declines Accelerate
by SHARA TIBKEN and MICHAEL S. DERBY | Wall Street Journal