Consumers More Confident, Home Prices Stuck in Neutral

U.S. consumer confidence saw an unexpected bounce back toward the positive in November, but home prices didn't move much during the third quarter. And investors are feeling more optimistic these days, according to the State Street Confidence Index.

November 30, 2011
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Walmart Stores

The latest S&P/Case-Shiller Home Price Indices, which were released on Tuesday, showed that U.S. home prices didn’t move much during the third quarter of 2011, with the National Home Price Index seeing a 0.1 percent uptick quarter-over-quarter. Compared with the third quarter of 2010, however, the national index was down 3.9 percent — but that could be seen as a bit of good news, since the decline between the second quarter of 2010 and the second quarter of 2011 was 5.8 percent, so the rate of decline might be slowing.

In September, the 10- and 20-city composites posted annual declines of 3.3 percent and 3.6 percent, respectively. Eighteen of the 20 MSAs tracked by Case-Shiller and both monthly composites had negative annual rates in September 2011, the only exceptions being Detroit and Washington D.C., presumably because of a dead-cat bounce in the former case and the good fortune of being the hub of the federal government in the latter case.

“It is a bit disturbing that we saw three cities post new crisis lows,” David M. Blitzer, chairman of the Index Committee at S&P Indices, noted in a statement. “For the prior three or four months, only Las Vegas was weakening each month. Now Atlanta and Phoenix have fallen to new lows too. On a monthly basis, Atlanta actually posted a record low rate of minus 5.9 percent in September over August.”

Consumers More Confident for Now

U.S. consumer confidence saw an unexpected bounce back toward the positive in November, according to the Conference Board on Tuesday. The index now stands at 56.0 (that happy year 1985 = 100), up from 40.9 in October. The Present Situation Index increased to 38.3 from 27.1, and the Expectations Index rose to 67.8 from 50.0.

Never mind weak housing or high unemployment or a feverish deficit or the euro crisis for the moment, let’s shop, consumers seem to be saying. Those respondents asserting that business conditions are “good” increased to 13.3 percent from 11.2 percent, while those who believe business conditions are “bad” declined to 38.2 percent from 43.7 percent. Consumers’ appraisal of the labor market was also more upbeat.

“Consumers’ apprehension regarding the short-term outlook for business conditions, jobs and income prospects eased considerably,” said Lynn Franco, director of the Conference Board Consumer Research Center, in a statement. “Consumers appear to be entering the holiday season in better spirits, though overall readings remain historically weak.”

Investors Feeling Better Too

What about investors? Are they more optimistic these days, despite the beating that Wall Street has taken in recent weeks? According to the latest State Street Investor Confidence Index, yes.

In November, the index stood at 97.2, up 2 points from October, State Street said on Tuesday. The 12-month low for investor confidence was back in August at 88.1, when it looked like the dysfunction of the U.S. Congress might tip the world into catastrophe. Since then, investors have been increasingly more confident, never mind the recent market losses attributed to euro-panic.

Wall Street ended mixed on Tuesday. The Dow Jones Industrial Average gained 32.62 points, or 0.28 percent, while the S&P 500 was up 0.22 percent. The Nasdaq lost 0.47 percent.