Home Prices Decline

The Wall Street Journal

30 November  2010

U.S. home prices dropped in September from a month earlier and the rate of decline showed signs of accelerating, according to the S&P Case-Shiller home-price indexes. Third-quarter prices were also down.

Separately, U.S. consumers brightened their moods in November–a good omen for holiday shopping, according to a report released Tuesday.

The indexes, based on the three-month averages of home prices, had fallen in August for the first time in four months, a delayed response to the housing-market weakness following the expiration of federal home-buyer tax credits in April.

Recent data suggest would-be buyers are sitting on the sidelines amid falling prices, high unemployment and worries about flaws in foreclosure documents. The National Association of Realtors said last week that sales of previously occupied homes decreased 2.2% in October.

The Case-Shiller index of 10 major metropolitan areas dipped 0.5% from August, while the 20-city index decreased 0.7%. Adjusted for seasonal factors, the declines were 0.7% and 0.8%, respectively.

For the third quarter, the S&P Case-Shiller U.S. National Home Price Index posted a 1.5% decrease from a year earlier. It declined 2% sequentially.

The economy continues to weigh on the housing market, along with the large supply of houses and “hidden” supply from delinquent mortgages, pending foreclosures or vacant homes, said David Blitzer, chairman of S&P’s index committee.

“New construction is running at less than half the pace needed to meet normal demand, so a sustained recovery could be a ways off,” he said.

In September, prices fell in every metropolitan statistical area covered by the index from August except Washington, D.C., which increased 0.3%, and Las Vegas, up 0.1%. Month-to-month decliners were led by Cleveland, with a 3% drop, and Minneapolis, down 2.1%.

Consumer Confidence Grows

The Conference Board, a private research group, said its index of consumer confidence increased to 54.1 in November, from a revised 49.9 in October, first reported as 50.2.

The November reading was the highest since a 54.3 reading in June and was better than the 52.5 expected by economists surveyed by Dow Jones Newswires.

The present situation index, a gauge of consumers’ assessment of current economic conditions, edged up to 24.0 from a revised 23.5, originally reported as 23.9.

Consumer expectations for economic activity over the next six months jumped to 74.2 from a revised 67.5, first reported as 67.8.

The rise in confidence “is a welcome sign as we enter the holiday season,” says Lynn Franco, director of the Conference Board Consumer Research Center. “Hopefully, the improvement in consumers’ mood will continue in the months ahead.”

The pickup in optimism is being converted into consumer actions. Holiday shopping got off to a healthy start over the Black Friday weekend and internet shopping on Cyber Monday.

The view of the labor markets is mixed. A large 46.5% of respondents think jobs are “hard to get” this month, little changed from 46.3% in October, while 4.0% of respondents think jobs are “plentiful,” up from 3.5% last month.

Expectations about labor markets showed more improvement. The percentage of consumers expecting more jobs in the months ahead rose to 15.5% from 14.5%, and the proportion expecting fewer jobs fell to 18.8% from 22.3%.