- The Washington Times - Wednesday, May 28, 2008

Confidence among American consumers fell in May to the lowest level since 1992 as the two-year housing slump showed no sign of bottoming.

The Conference Board’s confidence index declined more than forecast to 57.2, the New York research group said yesterday. The S&P;/Case-Shiller home-price index dropped 14.4 percent in March from a year earlier, the most since the index was first published in 2001. Separate figures from the Commerce Department showed April sales of new homes were the second-lowest since 1991.

The slide in home values, along with gasoline near $4 a gallon and rising unemployment, threatens to hobble the consumer spending that accounts for more than two-thirds of the economy.

“When confidence is as bad as it is on the consumer side, it’s hard to believe we’re going to be buying a lot of homes in the near term,” said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis. “The drag from home-price declines, the credit crunch and oil prices will probably be more severe than some had forecast earlier in the year.”

The Conference Board’s index of present conditions, a separate indicator, dropped to 74.4 in May from 81.9 in April. A gauge of expectations for the next six months declined to 45.7 from 50.0 the prior month, the report showed. The projected inflation rate a year from now soared to a record 7.7 percent, the survey showed.

“Until you start to see some declines in energy prices and labor markets come back, these numbers are going to look pretty soggy,” said Jay Bryson, global economist at Wachovia Corp. in Charlotte, N.C.

Sales of new homes increased 3.3 percent in April after readings for the prior month were revised lower, the Commerce Department’s report showed.

The April sales pace was an annual 526,000 homes, compared with a 509,000 rate in March that was the lowest in 17 years.

One bright spot is that inventories decreased. The supply of homes at the current sales rate dropped to 10.6 months’ worth from 11.1 months in March.

The median sales price last month increased 1.5 percent from April 2007 to $246,100.

The figures can be influenced by changes in the mix of sales at the regional level. For that reason, economists prefer price measures that track the same house over time, such as the S&P;/Case-Shiller index.

Property values might drop more than 30 percent from their peak in 2006, according to Robert Shiller, an economics professor at Yale University and co-creator of the S&P;/Case-Shiller housing-price index.

The Case-Shiller index of prices in the 20 largest metropolitan areas was down 17 percent through March from the record set in July 2006.

Karl Case, who co-founded the index with Mr. Shiller, said the rapid price declines reflected auction sales of foreclosed properties, which were helping to clear the glut of unsold homes.

“Banks don’t wait around,” he said yesterday. “They put it on the market and get rid of it. That means prices adjust more rapidly.”

The slide in prices may already be contributing to a recovery in demand in some areas. Sales in the San Francisco region jumped 29 percent from the previous month, the biggest April gain in at least 20 years, according to DataQuick Information Systems in San Diego.

The median price was $518,000, down 22 percent from the $655,000 peak in June and July 2007, the real estate data company said.

Even so, the percentage of consumers planning to buy a home in the next six months dropped to 2.1 percent from 2.5 percent, the Conference Board’s survey showed.

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