Consumers' Confidence Rose in Feb., Improving the Homebuying Outlook

The latest word from the Conference Board is that consumers aren't nearly as disenchanted as they had seemed in January. The board's confidence index bounced back 8.6 points in February, reaching 97.0, after having plunged more than 10 points in January.

"The bounce back of consumer sentiment in February suggests that the drop registered last month was largely a result of one-time circumstances ... rather than a signal from consumers that severe economic hardship was on the way," said Edgar R. Fiedler, vice president and economic counselor of the group.

The one-time conditions to which he referred were January's East Coast blizzard, the federal government shutdown, and a large number of layoff announcements.

Yet consumer confidence is far from high, Mr. Fiedler said. "Consumers are still tentative about the near-term performance of the economy and do not foresee it gathering substantial momentum soon."

The homebuying outlook did show some strength, however. The proportion of households planning to buy a home in the next six months climbed to 3.3% in the February survey, up solidly from 2.7% in February 1995 and the bestsince August. These prospective buyers are about evenly divided between those planning to buy new homes and those expecting to buy used.

The year-to-year increase reflects the decline in interest rates during those 12 months. For the week ended March 1, the average 30-year mortgage rate was 7.41%, according to a survey by Freddie Mac, the Federal Home Loan Mortgage Corp. In the comparable week last year, the rate was 8.53%.

Robert Van Order, Freddie's chief economist, said rates edged up in the week because of "relatively strong economic news and continuing uncertainty around a balanced-budget agreement." He added, "The increase was small, and we don't expect to see mortgage rates go much higher in the short term."