Home Prices Rise, Yet Confidence Fades
By Conor Dougherty and James R. Hagerty
The Wall Street Journal
October 28, 2009
Real-estate prices increased for the fourth consecutive month, but consumers are feeling more glum, a disconnect that shows how rising unemployment continues to weigh on households even as the economy improves.
The S&P/Case-Shiller home price composite 20-city index rose 1.2% in August from July, with help from lower mortgage rates and a push from the $8,000 federal first-time home-buyer tax credit that expires next month. The 20-city index is down 11.3% from a year ago.
Separately, the Conference Board on Tuesday reported that its gauge of consumer confidence fell to 47.7 in October, the second fall in two months. The present-situation index fell to 20.7, the lowest since February 1983, largely on consumers' downbeat assessment of the labor market.
High unemployment has made the Conference Board's index generally more negative than the Reuters/University of Michigan gauge of consumer sentiment, said Anthony Crescenzi, a portfolio manager and strategist at Pimco, a money-management firm in Newport Beach, Calif.
The housing report showed a real-estate market that is slowly improving but is still a long way from healthy. In 17 of 20 cities, the not-seasonally adjusted price index was higher in August than in July. Affordability has improved, providing an opportunity for some households that were priced out of the market as well as for cash-toting investors. Home prices have returned to 2003 levels, according to Standard & Poor's.
The best-performing markets were Minneapolis, where home prices were up 3.2% in August versus July, and San Francisco, which saw a 2.8% rise. The three markets that saw month-over-month decreases were Las Vegas (-0.3%), Charlotte (-0.4%) and Cleveland (-0.5%).
Analysts warn that prices are being propped up by the government and may resume falling in the coming months as that support fades away. The first-time home-buyer tax credit has sparked demand, in the process pulling sales that might have happened in late 2009 and early 2010 and jammed them into the past few months. The supply of foreclosed homes on the market, meantime, has temporarily decreased as a result of rules that require banks to consider more people for loan modifications.
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