By Dina ElBoghdady
Washington Post Staff Writer
Wednesday, December 30, 2009; A08
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."Programs' effects
The federal government has attempted to energize the housing sector by enacting a temporary tax credit on home sales that was recently extended through April. The Federal Reserve has also rolled out initiatives that have pushed down interest rates.
These programs appear to have stimulated sales and stabilized home prices to some degree. The Case-Shiller index had climbed for five consecutive months prior to October.
But Vitner said he's concerned that the federal intervention, including efforts that encourage lenders to modify mortgages, "have distorted prices somewhat and put off harsh adjustments that will be necessary for housing prices to find a bottom."
The consumer confidence survey number does not integrate attitudes about the housing market. But it does ask consumers if they plan to buy a home within the next six months, and the response remains at a relatively low level.
In Tuesday's report, consumer confidence rose to 52.9, up from 50.6 in November, largely driven by optimistic expectations for business and labor market conditions. The result is far better than this year's low of 25.3 in February. But it is well below 90, which signifies a healthy economy. It is also short of the August and September results.
"The index does not suggest that consumer confidence is high, but it's better than it was the previous couple of months when it wasn't very good at all," said Thomas Lawler, an economist. "I don't think the consumer confidence index is an oh-my-God- everyone-feels-good-now."
The index reveals a split in how consumers view current economic conditions and future expectations. Consumers rate current conditions as the worst since February 1983. By contrast, future expectations have risen for the past two months to their highest level since December 2007.
"If you look back at economic recoveries, consumer confidence bottoms out after the recession has ended," Vitner said. "Consumers sometimes are late in realizing that a recession has ended."