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Daily Global Commentary

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Home Prices Decline, Consumer Confidence Moves Up Slightly

Wed, Oct 1 2008, 00:27 GMT
by Asha Bangalore

Northern Trust

Home Prices Decline, Consumer Confidence Moves Up Slightly

The ongoing financial market crisis is at the front and center; the credit crunch and frozen money markets remain a serious global problem even as central banks continue to pump liquidity. We will comment on developments as more details of modifications to TARP become available.

The Case-Shiller Home Price Index for July declined 16.4% on a year-to-year basis in July, after a 15.9% drop in June. The July reading is the largest drop on record (see chart 1). The main message is that elevated inventories of unsold homes have to be cleared for home prices to stabilize.

Of the 20 metro areas, six of them continue to post declines in home prices that exceed 20% (see chart 2) and show no signs of deceleration, with the exception of Miami where prices showed a marginal improvement of a 28.25% drop in July compared with 28.32% reduction in June. Among the remaining fourteen metro areas, Tampa (-19.4% vs. -20.1% in June), Atlanta (-8.2% vs. -8.4%), Dallas (-2.5% vs. -3.2%) and Minneapolis (-13.06% vs. -13.83%) point to a small deceleration in the pace of declines. In other words, home prices in 15 out of 20 metro areas continue to show an accelerating pace of decline.

The Conference Board’s Consumer Confidence Index rose to 59.8 in September from 59.5 in August. The cutoff date for the survey was September 23, which is prior to the recent development of the market turmoil and the rejection of the bailout bill in the House of Representatives. The Present Situation Index slipped to 59.8 from 65.0 while the Expectations Index improved to 60.5 from 54.1.

The number of respondents viewing jobs as hard to get advanced to 32.8% in September from 31.7% in August and those indicating plentiful fell to 12.2% from 13.5% in August. The net of these two indexes rose to 20.6 from 18.2 in August, which suggests a higher unemployment rate in September.

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Published on  Wed, Oct 1 2008, 00:32 GMT