U.S. home prices rise but consumer confidence cools
NEW YORK |
NEW YORK (Reuters) - U.S. home prices edged higher for the second month in a row in March as the housing recovery picked up traction, while gains in some of the hardest hit areas suggested the improvement was becoming more broad-based.
But consumer confidence cooled in May to its lowest level in four months, separate data showed on Tuesday, as Americans turned gloomy about the job market and the economic outlook.
The closely watched S&P/Case Shiller composite home price index of 20 metropolitan areas gained 0.1 percent in March on a seasonally adjusted basis, though it fell shy of economists' forecasts for a gain of 0.2 percent.
The housing market has been a thorn in the side of the broader economic recovery but the sector has been gathering momentum with new construction and sales rising in April.
"In my mind there is no question that housing has bottomed, in terms of home sales, home construction and home prices, but the recovery is still going to be very modest or very sluggish," said Mark Vitner, senior economist at Wells Fargo Securities in Charlotte, North Carolina.
Prices in the 20 cities fell 2.6 percent from a year ago, an improvement from the 3.5 percent yearly decline seen last month. Seven of the 20 cities saw price increases from a year ago, including hard-hit Detroit and Phoenix.
"While a broad regional variation remains, the fact that some of the areas hardest hit during the housing downturn, such as Florida, Arizona and California, have seen gains in recent months is a positive sign that the gradual improvement in housing conditions is becoming somewhat broader based," Peter Newland, an economist at Barclays, wrote in a note.
The report said that for the first quarter, while the pace of declines slowed, the indexes were still plumbing new post-financial-crisis lows. Prices were down 2 percent in the first three months of the year following a 3.9 percent decline in the last three months of 2011.
"It's an optimistic sign, but I think it's still unclear," said Robert Shiller, Yale economics professor and co-creator of the index.
"We have been in a flat place for several years. We are showing signs of breaking out, but these are the signs we saw in previous years that fizzled, so I don't know where we are going in the near-term future," Shiller said during a conference call.
Financial markets saw little reaction to the data as investors kept their eyes on the euro zone. Wall Street was up nearly 1 percent on optimism Greece will stay in the euro zone, but worries about Spain's banking system sent Treasuries prices higher and the euro lower.
A report from industry group the Conference Board showed consumer confidence fell to its lowest level since the start of the year, making for the third month of declines.
The index of consumer attitudes fell to 64.9 from a downwardly revised 68.7 the month before, confounding expectations for a gain to 70.0.
"I would expect confidence will remain under pressure as long as negative headlines from Europe persist, which should weigh on confidence in the coming months," said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York.
"This will call into question the efficacy of the U.S. recovery."
The figures were in contrast to last week's University of Michigan survey that showed consumer sentiment rose to its highest level in more than four years.
Consumers' view of the labor market soured with 41.0 percent saying jobs were hard to get, up from 38.1 percent the month before, while 7.9 percent said jobs were plentiful, down from 8.4 percent.
The snapshot of the labor market comes ahead of the comprehensive government figures for May at the end of the week, which are expected to show the economy added 150,000 jobs this month.
The retreat in Americans' assessment of both their present situation and outlook suggests the pace of economic growth in the coming months could moderate, Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.
But consumers were more upbeat on income prospects with 15.2 percent expecting an increase compared to 13.9 percent in April.
Purchasing plans also improved and 10.4 percent said they had plans to buy an automobile within the next six months, up from 9.9 percent last month. Those anticipating major appliances purchases rose to 45.3 percent from 44.6.
(Additional reporting by Chris Reese and Julie Haviv in New York and Lucia Mutikani in Washington; Editing by Chizu Nomiyama)
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