WASHINGTON (Reuters) - Prices of U.S. single-family homes plunged a record 14.4 percent in March from a year earlier, while consumer confidence slumped to its lowest in 16 years in May as gasoline prices surged.
The Standard & Poor’s/Case Shiller composite index of 20 metropolitan areas released on Tuesday showed prices of previously owned homes fell 2.2 percent in March, deepening their year-on-year decline.
Separately, the Conference Board said its consumer confidence index slumped to 57.2 this month from 62.8 in April as rising gasoline costs and falling home prices made Americans increasingly nervous both about current conditions and the future.
In one positive sign, however, the Commerce Department said sales of newly constructed single-family homes rose in April for the first time in six months, while the inventory of unsold new homes declined for the 12th straight month. But the previous month’s decline was even steeper than first reported.
“In terms of prognosis, there remains no reason for the situation to stabilize and every reason for it to continue to deteriorate yet further with price declines accelerating,” said BNP Paribas economist Richard Iley, referring to the record declines in the S&P report.
Prices of U.S. Treasury securities fell on Tuesday, weighed by ongoing concerns about inflation amid persistently high energy prices. U.S. stocks ended higher with the Dow Jones industrial average up 68 points. The dollar rose against major currencies.
Falling home prices have led to a wave of foreclosures that is expected to grow worse before it gets better. The crisis in foreclosures, which pressure prices even lower, has spurred plans by regulators and lawmakers to keep borrowers in their homes by forgiving a portion of their loan principal.
Housing markets that grew the most during the housing boom, such as Las Vegas, Nevada and Miami, Florida, are leading the decline, S&P said. A separate S&P index of prices in 10 metropolitan areas declined 2.4 percent in March for a record 15.3 percent year-over-year drop.
“The key to any degree of stabilization in the house market is, of course, the balance between supply and demand, specifically a reduction in the unprecedented inventory overhang that is pressuring prices lower,” Iley said.
NEW HOME SALES RISE
The Commerce Department said sales of new homes rose 3.3 percent in April to a 526,000 annual rate. However, they were down 42 percent from a year ago, the largest year-over-year drop in nearly 27 years.
While April’s sales gain was the first since October, it followed a drop in March that was much sharper than previously reported. Sales in March fell 11 percent; a month ago the department had said they were off just 8.5 percent.
“It is premature to call the bottom for housing,” said Ken Mayland, economist with ClearView Economics, near Cleveland.
Despite the lingering weakness in sales, the report showed a sharp pullback in construction activity by builders was helping to reduce the backlog of homes on the market.
The inventory of homes available for sale at the end of April fell 2.4 percent to 456,000, the 12th straight monthly decline. That represents 10.6 months’ supply at April’s sales pace, down from 11.1 months’ worth in March.
The housing market has been one factor weighing on consumer confidence. The Conference Board’s gauge of sentiment has dropped by almost half since July, when housing troubles triggered the most severe credit crisis in at least a decade.
Consumers this month grew both more worried about what is happening now and about the future. The present situation index dropped to 74.4 from 81.9, while the expectations barometer fell to 45.7 from 50.0.
Inflation expectations rose to an all-time high 7.7 percent, well above April’s 6.8 percent, the Conference Board said.
Additional reporting by Pedro Nicolaci da Costa and Al Yoon in New York; Editing by Neil Stempleman
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