Consumer confidence picks up, but home prices flatten out
Wednesday, December 30, 2009
Consumers are feeling a little better about the economy but home prices are flattening out after an unexpected rebound in the spring and summer, according to two closely watched reports released on Tuesday.
A monthly survey by the Conference Board, a private research group, found that consumer confidence picked up slightly in December after rising in November, but still remains at a weak level. The results largely capture consumer attitudes about the labor market.
Meanwhile, the Standard & Poor's/Case-Shiller home-price index, which tracks sales in 20 major metropolitan areas, showed that prices of single-family homes were largely flat in October compared with September.
The housing market's decline in recent years has helped undermine consumer confidence and cripple the economy. Reinvigorating the housing sector and boosting confidence are considered key components to revitalizing the economy, economists say. As people feel more secure about jobs, they are likely to spend more money on goods and services, including big-ticket items such as homes.
The reports released Tuesday seem to be pointing in the same direction.
"While consumer confidence is improving, it's still a little shaky, so consumers are not out there rushing to buy," said Joel L. Naroff, an economist with Naroff Economic Advisors. "They're out there tentatively, and that is reflected in the housing numbers, too."
Earlier this year, the biggest concern among many economists was that home prices would decline unabated. By late spring and into the summer, prices rebounded unexpectedly before tapering off in September and then flattening out in October on a non-seasonally-adjusted basis, according to the Case-Shiller price index. On a seasonally adjusted basis, prices rose 0.4 percent.
The index measures repeat sales of homes in the 20 top metro areas and reflects a rolling three-month average, so that the October data capture sales in August and September as well.
Non-seasonally adjusted prices rose in only seven metro areas: Detroit, Los Angeles, Phoenix, Portland, San Diego, San Francisco and Seattle. Prices were up more than 1 percent in Phoenix and San Francisco.
The steepest month-to-month declines were in Tampa (down 1.6 percent) and Chicago and Atlanta (both down 1 percent.) In the Washington area, prices were down 0.4 percent.
Compared with a year ago, prices in October were down nationally 7.3 percent. The largest year-over-year drop was in Las Vegas, where prices plunged 26.6 percent. In the Washington area, prices were down 2.8 percent.
"We're not seeing a great deal of recovery in home prices," said Mark Vitner, senior economist at Wells Fargo. "What may happen is that prices will plow along the bottom for a year or two."