Home Prices Rise, But Confidence Falls
- Jun 30, 2010
June 30, 2010
By Dees Stribling, Contributing Editor
The S&P/Case-Shiller Home Price Indices had an up month in April, with the 10-City and 20-City Composite Home Price Indices increasing 4.6 percent and 3.8 percent, respectively, compared to the same month last year. No one in the residential real estate business is breaking out the party hats, however, since the uptick was widely seen as a homebuyer tax credit-inspired anomaly.
“Home price levels remain close to the April 2009 lows set by the S&P/Case Shiller 10- and 20-City Composite series,” noted David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, in a statement on Tuesday. “The month-over-month figures were driven by the end of the federal first-time home buyer tax credit program on April 30.”
After April’s bump, don’t look for more bumps ahead, at least for the rest of the year, Blitzer added. “Other housing data confirm the large impact, and likely near-future pullback, of the federal program,” he explained. “Recently released data for May 2010 show sharp declines in existing and new home sales and housing starts. Inventory data and foreclosure activity have not shown any signs of improvement. Consistent and sustained boosts to economic growth from housing may have to wait to next year.”
Consumers Don’t Like the Way Things Are Going
Meanwhile, consumers seem to be souring on the prospect of a continuing soft economy (and who can blame them?). On Tuesday, the Conference Board’s Index of Consumer Confidence fell to 52.9 in June from 62.7 in May. It was a much larger drop than expected.
Those consumers saying conditions are “good” decreased to 8 percent from 9.7 percent, while those saying business conditions are “bad” increased to 42.4 percent from 39.5 percent. Consumers’ assessment of the labor market was also less favorable than in earlier months this year. Those claiming jobs are “hard to get” increased to 44.8 percent from 43.9 percent, while those saying jobs are “plentiful” decreased to 4.3 percent from 4.6 percent.
“Increasing uncertainty and apprehension about the future state of the economy and labor market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence,” Lynn Franco, director of the Conference Board’s Consumer Research Center, said in a statement on Tuesday. “Until the pace of job growth picks up, consumer confidence is not likely to pick up.”
Homebuyer Tax Credit Deadline May be Extended
The U.S. House of Representatives voted on Tuesday, by a lopsided 409 to 5, to extend the period during which pre-April 30 home buyers have to close their deals to qualify for the federal homebuyer tax credit. As things now stand, homebuyers have until Wednesday, June 30, to close on their purchases; the House bill extends the deadline until September 30.
According to the National Association of Realtors, some 180,000 buyers would miss out on the tax credit if there’s no extension. The U.S. Senate is now taking up its version of the bill.
But even the bill passes, it will probably do little to buoy the U.S. housing market, which is still in a full-body cast. According to a report Wednesday by RealtyTrac, nearly one out of three home sales nationwide during 1Q10 involved a foreclosed property.
Wall Street was in an even more sour mood than consumers on Tuesday. The Dow Jones Industrial Average took a 268.22-point tumble, which represented a loss of 2.65 percent. The S&P 500 dove 3.1 percent and Nasdaq dropped 3.85 percent.