Consumer Confidence Rises; Home Price Declines Accelerate

MBA (10/1/2008 ) Velz, Orawin
The Conference Board's Consumer Confidence Index rose by 1.3 percentage points to 59.8 in September. This was the third consecutive increase. The survey results were taken before financial turmoil intensified and therefore did not capture all of the effects of the last week.
The expectations component, based on respondents’ assessment of the outlook over the next six months, led the increase, rising to 60.5 from 54.1 in August. Consumers' appraisal of current conditions eroded further in September. The present conditions component fell to 58.8 from 65.0.

Consumer assessment of current labor market conditions deteriorated further. The share of consumers finding jobs plentiful fell to 12.2 percent—the smallest share in five years—from 13.5 percent. The share finding jobs hard to get increased to 32.8 percent in September from 31.7 percent in August.

In a separate report, home prices continued to decline in July in selected major cities, according to the Standard and Poor/Case-Shiller home price indices. The year-over-year declines in the indices continued to set records, while the month-to-month declines in the indices accelerated, reversing the trend seen over the last few months.

The 10-metropolitan area composite index decreased by 17.5 percent in July from a year ago, the largest year-over-year decline since the inception of the series in 1987. The broader 20-metropolitan area composite index showed a year-over-year drop of 16.3 percent, also the sharpest decline in the history of the broader index since its inception in 2000.

A month-to-month comparison offered a disappointing picture of home price trends. Prior to the July report, price declines had been moderating since February. The 20-metropolitan area composite index dropped 0.9 percent in July, accelerating from a 0.5 percent drop in June. The month-to-month drop in the 10-metropolitan area composite index also accelerated to 1.1 percent in July, compared with a 0.6 percent drop in June.

All 20 metropolitan areas reported year-over-year home price drops, led by a 29.9 percent drop in Las Vegas and a 29.3 percent drop in Phoenix. Charlotte continued to post the smallest year-over-year decline of 1.8 percent. The 20 selected cities do not represent the overall picture of the nation’s housing market, however, with seven of the total coming from the four states experiencing the most significant home price drops in the nation: Arizona, California, Florida and Nevada. Prices in these seven cities have declined by at least 20 percent in July from July 2007.