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Case-Shiller home prices in upward trend but consumer confidence slips
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Home prices remain in an upward trend, rising for the fourth-consecutive month according the the closely-followed S&P/Case-Shiller Home Price Index, but the latest reading on consumer confidence suggests that many refuse to embrace the burgeoning economic recovery.
The Case-Shiller Home Price Index for 20 major cities increased by 1.2% in August and is now 4.8% above the low touched last April.
Rising home sales are being credited for the nascent recovery in home prices, and rising prices are critical to the economic recovery as many of the bank securities that have weighed on the credit markets over the past two years are tied to home values.
The improvement is clearly good news, but many analysts fear that rising prices may be stymied when the first-time home buyer tax credit expires at the end of November, and a new wave of foreclosures potentially occurs next year.
Lackluster confidence
Meanwhile, growing worries that unemployment will keep rising took a big toll on consumer confidence during October. The Conference Board reported that the Consumer Confidence Index fell 5.7 points to 47.7, far below the forecast offered by Bloomberg of 54.0.
The survey of 5,000 households is down for the second-straight month and has been stuck in a narrow range since May, despite signs that the economy is pulling out of the recession.
Weakness in consumer confidence bodes poorly for retailers which depend heavily upon the Christmas cheer of holiday shoppers. With the Present Situation Index at its lowest reading in 26 years, retailers may find themselves offering steep discounts to entice consumers worried about meager savings accounts and bleak job prospects.
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