Consumer Confidence Up, Home Prices Downby Tim Manni
The Conference Board’s index of consumer confidence rang in above estimates for the month of April. The 12.3-point gain ousted expectations of a five-point increase — launching this month’s gain to the fourth highest in the index’s 32-year history.
April’s increase led to the index’s highest-monthly reading since last November. Despite opinions that current conditions remain weak, consumer outlook for the future are improving. The index’s expectations component rose by over 19 points to its highest reading since last September.
The potential for the labor market as well as buying plans also improved in April. According to DismalScientist.com, “Buying plans improved across all major categories but remained at very low levels.”
A factor which continues to keep home buying plans in place has been falling home prices. The Case-Shiller home price index reported a 2.2% decline in February from the month before. Although the index, which measures home prices in 20 major U.S. cities, has begun to decline at a slower pace:
Prices in 20 cities are down 18.6% in the past year, compared with a 19% drop in the 12 months ending in January. It was the first time in 16 months that the decline in prices did not set an annual record.
In sections of the country like Florida, where the real estate bubble first broke, they’re beginning to see a surge in home sales due to not only low mortgage rates and federal tax breaks, but to extremely low home prices. Yet the advantage of falling home prices can be devastatingly one-sided:
Home buyers are seizing the opportunities in South Florida’s housing market as deeply discounted prices and historically low mortgage rates drive sales. Many sellers, however, are reeling, not able to unload their homes for close to what they paid.
Until the sharp price declines ease – and that may take awhile – the region’s housing market won’t begin to recover from a slump that’s nearing 40 months.
Consumer confidence is a key element to our economic recovery. While the surge in confidence isn’t expected to boost spending, Americans’ outlook for the future is improving, and that’s something worth celebrating.