Posted on 23 Feb 2010
Figures on Tuesday showed that consumer confidence in the US fell to the lowest level in 10 months on fears about a slow labor market recovery.
The Conference Board's index of consumer sentiment fell to 46 in February from a revised 56.5 the prior month. Lynn Franco, director of the Conference Board’s consumer research center, said that fewer consumers were expecting improvements in business conditions or the jobs market in the next six months.
The weaker than expected report likely reflects the grim political climate and volatility in the financial markets, argues Ted Wieseman, an economist at Morgan Stanley. More worrying, Mr. Wieseman said, is that the weak jobs outlook could bode poorly for next week’s employment report.
US house prices meanwhile continued to bump along in December, notching a small monthly fall while recording slowing annual declines, while consumer confidence fell sharply on fears about the labor market.
Home prices in the 20 largest US cities fell by 0.2 per cent between November and were off by 3.1 per cent from the same month a year ago, according to the closely -watched Case-Shiller home price index. The annual price decline has eased each month this year.
“As measured by prices, the housing market is definitely in better shape than it was this time last year, as the pace of deterioration has stabilized for now,” said David Blitzer, chairman of the index committee at Standard & Poor’s, which publishes the report. “However, the rate of improvement seen during the summer of 2009 has not been sustained.”
In the last three months of 2009, US home prices fell by just 2.5 per cent. That represents a sharp improvement from the first quarter, when they plunged by 19 per cent.
Despite signs of improvement, trouble spots remain for the housing market, and cities such as Detroit, Las Vegas and Tampa continue to deal with double-digit home price declines on an annual basis. San Francisco, San Diego, Washington and Denver recorded solid year-on-year gains in December.
Last week, President Barack Obama announced $1.5 billion in support for housing finance agencies in the states worst-hit by the housing crisis - Nevada, Arizona, California, Florida and Michigan. All have seen falls of more than 20 per cent in house prices.
Mr. Blitzer noted that in the fourth quarter, average US home prices were hovering close to where they were in the summer of 2003.
Economists have been cautious about calling a bottom for the US housing market, which still faces strong headwinds from foreclosures and tight credit. President Obama's announcement came as the Mortgage Bankers Association said 15 per cent of all home loans were either in foreclosure or late on a payment, the highest proportion since its surveys began in 1972.
“While many are interpreting the most recent results from this index as indicative of a bottom in home prices, we do not believe this to be the case,” said Joshua Shapiro, chief US economist at MFR. “Temporary demand stimulated by the home buyer tax credit has played an important role, particularly in the wake of the earlier magnified downside.”
Mr. Shapiro notes that home prices soared by 155 per cent in the seven years to 2006, when they peaked, and have only fallen 41 per cent since then. Economists at High Frequency Economics predict that prices could fall in the first half of the year as foreclosures cause a wave of supply in the housing market.