U.S. home price decline eases, but consumers gloomy
The drastic plunge in U.S. home prices continued to level off in April, hinting at stabilization in the housing market, but job market worries pushed consumer confidence to a seven-month low in June.
Although house prices were helped by the start of the spring selling season, data showed Tuesday, economists cautioned prices will likely continue to crawl along at low levels because of the unusually large number of homes up for sale and ongoing foreclosures.
"The degree of hemorrhaging seems to be slowing," said Anthony Chan, chief economist at JPMorgan Private Wealth Management in New York.
"The patient is still bleeding and will be bleeding until we get all that distressed and shadow housing market inventory down to smaller levels."
While housing makes up a fraction of the U.S. gross domestic product, weak prices also constrain consumer spending, and most economists expect the economy will be hard pressed to make a sustainable recovery without an improvement in home prices.
Indeed, consumers were more pessimistic about the economic outlook in June because of worries about the labor market and income prospects.
The weaker pace of economic growth seen in the first quarter persisted into the second quarter, though economists still expect growth to pick up in the second half of 2011 as temporary factors such as high energy prices and supply chain disruptions from Japan's March earthquake ease.
Forecasters see second-quarter growth at around 2 percent after the economy grew at a 1.9-percent pace in the first three months of the year.
The S&P/Case-Shiller composite index of single-family home prices in 20 metropolitan areas dipped 0.1 percent month-over-month on a seasonally adjusted basis. A Reuters poll of economists had forecast a decline of 0.2 percent.
The decline was the smallest since last July. Average home prices fell from a year ago and were still at levels seen in the summer of 2003.
On a non-seasonally adjusted basis, however, the index rose 0.7 percent, its first advance in eight months, the report said.
"The seasonally adjusted numbers show that much of the improvement reflects the beginning of the spring-summer home buying season," David Blitzer, chairman of the index committee at Standard & Poor's, said in a statement.
"It is much too early to tell if this is a turning point or simply due to some warmer weather."
U.S. home prices were supported last spring by a tax credit, but the housing market has struggled since the credit expired. A monthly increase in prices in nine of the 20 cities in the index suggests some of the more severe pressure in the wake of the expiration has waned, Barclays Capital Research said in a note.
The report helped give U.S. stocks a boost, as did optimism the Greek parliament would adopt an unpopular austerity plan needed to avert the euro zone's first default.
The Conference Board, a private-sector industry group, said its index of consumer attitudes fell to 58.5 in June from a revised 61.7 in May, and short of expectations for 60.5.
The sour view came after the economy added just 54,000 jobs last month while data earlier in the week showed consumer spending was flat in May from April.
The Conference Board report echoed the preliminary Thomson Reuters/University of Michigan survey earlier in the month. The final reading is expected Friday.
Economists said political wrangling in Washington as lawmakers try to come up with a budget deal to extend the debt ceiling likely also hurt sentiment.
"Add turmoil abroad, a debt ceiling commission still in gridlock and a Federal Reserve that appears to have emptied out their bag of tricks, and it's no wonder the consumer has lost confidence in the recovery," Lindsey Piegza, economist at FTN Financial, wrote in a note.