Home prices are leveling out after an unexpected rebound in the spring and summer while consumers are feeling a little better about the overall economy, according to two closely watched reports released on Tuesday.
The Standard & Poor's/Case-Shiller home-price index, which tracks sales in 20 major metropolitan areas, showed that prices of single-family homes largely were flat in October compared with September. Meanwhile, a monthly survey by the Conference Board, a New York-based research group, found that consumer confidence picked up slightly in December after rising in November, but still remains at a weak level. The results largely capture consumer attitudes about the labor market.
The two reports released Tuesday seem to be pointing in the same direction. While consumer confidence is improving, it remains a little shaky, says Joel L. Naroff, an economist with Naroff Economic Advisors, and that means consumers are not rushing to buy homes but are tentatively exploring the market.
In recent years, the housing market's decline has helped weaken consumer confidence and cripple the economy. Reviving the sector and boosting confidence are considered key elements to revitalizing the economy, economists say. As people feel more secure about jobs, they are likely to spend more money on goods and services, including big-ticket items such as homes.
Earlier this year, the main concern among many economists was that home prices would decline unabated. By late spring and into the summer, prices rebounded unexpectedly before tapering off in September and then flattening in October on a non-seasonally-adjusted basis, according to the Case-Shiller index. On a seasonally adjusted basis, prices rose 0.4%. The index measures repeat sales of homes in the 20 top metro areas and reflects a rolling three-month average, so that the October data capture sales in August and September as well.
The Conference Board's Consumer Confidence Index in December stands at 52.9, up from 50.6 in November. The baseline for the index, set in 1985, is 100. United Kingdom-based research company TNS conducts the monthly Consumer Confidence survey of 5,000 randomly selected households. The cutoff date for this month's survey was Dec. 21.
"Consumer confidence posted yet another moderate gain in December as expectations for the short-term future increased to the highest level in two years," says Lynn Franco, director of The Conference Board Consumer Research Center.
The survey breaks down how consumers feel about both current conditions in the Present Situation Index and short-term conditions, looking roughly six months ahead, in the Expectations Index.
Survey respondents claiming business conditions are "bad" increased in December to 46.6% from 44.5%, while those claiming conditions are "good" decreased to 7.0% from 8.1%. Consumers' appraisal of the job market was mixed. Those claiming jobs are "hard to get" decreased to 48.6% in December from 49.2% a month earlier, while those claiming jobs are "plentiful" decreased to 2.9% from 3.1%. The short-term outlook improved in December. Those anticipating business conditions will improve over the next six months increased to 21.3% from 19.7%, while those expecting conditions will worsen decreased to 11.9% from 14.6%.