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Home Prices Stabilize, Consumer Confidence Has Not
Home prices in Marin are beginning to stabilize, much like US home values, which showed the first monthly rise in prices in three years, consoling consumers reeling from continued unemployment.
The report, a 20 city index published by S & P and Case-Shiller, reported a price increase of half a percent. The gain is the first since July 2006 and the largest since May 2006.
Stabilization of the reeling housing market, the worst since the 30's, and an improving stock market may help improve the record low household wealth we are currently experiencing. However, consumer confidence could remain low as unemployment is expected to continue and go above ten percent by early next year, hindering a recovery from our worst recession in fifty years.
Still, the fact that home values are stabilizing, could be indicative that things will not be getting any worse. People will continue to fear for their jobs, and the decline in household wealth will have a negative impact on consumer spending for several years.
In fact, the Conference Board's consumer confidence report showed worse than expected results. Consequently, stocks fell and Treasury securities rose. The S & P 500 was down slightly from Monday's 8 month high. The yield on the 10 year Treasury note, a benchmark for interest rates, went from 3.73% late Monday to 3.69% as of just after 4PM ET.
The consumer confidence index fell to 46.7 from 49.2 in June, the second decline for the index in a row. The index reached a record-low in February at 25.4.
The home price index was just over 17% below last year, less than expected and the smallest year-to-year drop in 9 months.
Economists had projected the index would drop nearly 18%, according to the median of projections made by 32 economists in a Bloomberg survey. The range of the projections was 17.4% to 18.2%.
Compared with the previous month, 14 cities showed gains, led by Cleveland at just over 4% and Dallas at just under 2%.
The report follows several other positive sources of data that could be signs the housing market is stabilizing. The Federal Housing Finance Agency reported last week in its purchase only price index that prices were down 5.5% in May from last year, the smallest year to year drop in ten months. The FHFA index reports on houses purchased with Fannie Mae or Freddie Mac backed mortgages and does not include foreclosure sales and properties purchased with unconventional mortgages.
The Conference Board's report on economic conditions decreased from 24.9 to 23.3, indicating unease about job availability. The measure of expectations about the upcoming 6 months dropped from 65.6 to 62.1 as citizens' pessimism over job security and income opportunity rises.
Other reports are consistent with the data. The Reuters / University of Michigan index of consumer confidence fell in July for the first time in 5 months as continued job cuts and stagnant salaries concern workers.
There have been 6.4 million jobs lost since December 2007, when the recession began, the most jobs lost in an economic downturn in eighty years. Economists predict the unemployment rate will top 10 percent by early next year. In June, the rate was at 9.4 percent, the highest it's been since 1983.
Marin Real Estate Blog