WRAPUP 4-US confidence bounces; glimmer of hope in housing

* Consumer confidence stronger than expected

* New home sales rise due to revision

* Rate of monthly house price fall slows (Updates with S&P peak-to-trough home price forecast)

By Burton Frierson

NEW YORK, Aug 26 (Reuters) - U.S. consumer confidence recovered more than expected in August as fears over inflation eased, while financial markets combed through housing data on Tuesday for reasons to hope the worst may be over.

Sales of newly built U.S. single-family homes in July were lower than economists expected but rose from a June pace that was the slowest in nearly 17 years, while the glut of homes on the market also eased, a government report showed on Tuesday.

Another report said U.S. home prices in metropolitan areas were down 15.9 percent from a year earlier, a record drop. Still, the monthly rate of decline slowed from May, which suggested the decimated U.S. housing market may be stabilizing, according to the S&P/Case Shiller report.

Separately, the S&P credit rating agency said it now expects home prices as measured by the Case-Shiller index to fall 29 percent from peak-to-trough, up sharply from its previous forecast of a 20 percent drop in April.

The Conference Board said its index measuring consumers' mood jumped to 56.9 this month from July's 51.9 for the highest reading since May, while a decline in inflation expectations should please Federal Reserve officials worried about an unwelcome rise in price pressures this year.

The data by no means suggested the stagnant U.S. economy was vaulting to recovery, though some analysts said it showed embryonic signs of stabilization that could herald a slow turn for the better if maintained.

"Confidence is still quite depressed, but it's a glimmer of hope from the lows we saw in June," said Dana Saporta, economist at Dresdner Kleinwort Securities LLC in New York.

"I attribute the increase to the drop in gasoline prices, which offset a deteriorating labor market."

U.S. stocks .DJI initially rose after the release of the consumer confidence data but lost momentum and were little changed from opening levels by the close.

The U.S. dollar .DXY gained against other currencies while U.S. government bonds US10YT=RR, which benefit from weak economic conditions, added to earlier losses.

The improvement in consumer sentiment came during a month when oil prices CLc1 retreated further from July's record highs but consumers' evaluation of their present situation still fell to its lowest in five years in the survey.

Much of this may reflect job-market insecurity. The index of "jobs hard to get" rose to 32.0 from a revised 30.2 in July, pushing the gauge to its highest since October 2003.