April 27, 2010 / 2:33 PM / 10 years ago

Confidence up, home prices rise on annual basis

NEW YORK (Reuters) - U.S. consumer confidence firmed to a 1-1/2-year high in April, while house prices rose in February on an annual basis for the first time in more than three years, in fresh signs of a strengthening economy.

New homes in the Library Commons development are shown in Boca Raton, Florida April 22, 2010. March new home sales results are scheduled for release on April 23. REUTERS/Joe Skipper

The increasing confidence was driven by growing optimism about the labor market, according to a U.S. Conference Board report released on Tuesday, and was the highest since the collapse of investment bank Lehman Brothers in September 2008.

The Board’s index of consumer attitudes rose to 57.9 from a downwardly revised 52.3 in March, well above the median forecast for a reading of 53.5.

“We have been seeing weakness in consumer outlook and this has, at least temporarily, reversed that,” said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey.

On Monday, however, a Harris Poll found Americans’ view of the economy was unchanged in April despite encouraging data.

U.S. house prices have benefited from a federal homebuyer tax credit that expires on April 30, but a glut of mortgage foreclosure sales continues to weigh on the market, Standard & Poor’s said in a separate report.

The S&P/Case-Shiller 20-city composite price index fell 0.9 percent on an unadjusted basis in February, worse than a 0.3 percent decline estimated in a Reuters survey. Seasonally adjusted, prices declined 0.1 percent, as expected, after a string of eight straight monthly increases.

S&P’s 10-city and 20-city index increased year-on-year for the first time since December 2006, rising 1.4 percent and 0.6 percent, respectively, compared to February 2009.

But the 20-city index gain was half of the rise forecast in a Reuters poll.

“We are really still in what we consider a stabilization period,” said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York.

The Federal Reserve — the U.S. central bank — opened a two-day meeting on Tuesday that is widely expected to end with a decision to leave interest rates on hold near zero and a fresh commitment to keep them there for an “extended period.”

The gathering takes place against a backdrop of increasing financial market turmoil in Europe, which should only serve to reinforce the Fed’s reluctance to signal any near-term inclination to tighten monetary policy.

Another report released on Tuesday said U.S. manufacturing and services sectors should continue to grow this year.

The Institute for Supply Management’s semiannual forecast said manufacturing revenue should jump 6.3 percent while for non-manufacturing it should rise 0.3 percent.

Major U.S. stock indexes ended down around 2 percent while the dollar rose against the euro and U.S. government bond prices soared after downgrades of Greek and Portuguese debt.

From a peak in mid-2006 through February 2007, U.S. home prices are still down more than 30 percent on average nationwide, S&P noted.

While prices slid in February, mortgage rates stayed low near 5.0 percent and the number of home sales leaped in March as buyers rushed to take advantage of the tax credit of up to $8,000. Sales and prices will be monitored this spring to see if the momentum continues once the tax incentive ends.

Reporting by Lynn Adler, Caroline Valetkevitch and Wanfeng Zhou; Editing by James Dalgleish

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