- The Washington Times - Thursday, December 28, 2006

ASSOCIATED PRESS

The U.S. economy is ending the year with a hopeful set of reports showing that consumer confidence soared in December and a pickup in the battered housing market.

The Conference Board reported yesterday that consumer confidence shot up to an eight-month high of 109.0 in December.

That was only slightly below April’s 109.8, when confidence had hit the highest point in four years before soaring gasoline prices and a slumping housing market took their toll on Americans’ perception of the future.

Meanwhile, the National Association of Realtors reported that sales of existing homes edged up 0.6 percent in November to a seasonally adjusted annual rate of 6.28 million units, after a 0.5 percent rise in sales in October.

It marked the first back-to-back increases in sales of existing homes since spring 2005 and followed news Wednesday that sales of new homes rose 3.4 percent last month.

The better-than-expected showing for both new and existing home sales could be signaling that this year’s severe slide in housing is starting to bottom out, analysts said.

However, they cautioned not to expect a sharp rebound. Rather, they said they look for prices to continue falling for several more months as sellers are forced to trim their asking prices more in the face of near-record levels of unsold homes.

For October, the median price for an existing home fell for a record fourth consecutive month, dropping to $218,000, down 3.1 percent from a year ago.

David Lereah, chief economist for the National Association of Realtors, estimated that each 1 percent fall in home prices brings an additional 50,000 buyers into the market.

Housing had been the economy’s standout performer as the lowest mortgage rates in four decades gave the country five straight years of record sales of both new and existing homes.

This year, sales of existing homes should fall by about 9 percent with a smaller 1 percent decline expected in 2007, Mr. Lereah said.

He said that one-fourth of the country, the formerly hottest markets in such areas as California and Florida, will see prices decline further while the other three-fourths of the country will see sales and prices keep rising.

Other economists cautioned that while they think housing has hit bottom, it could be a prolonged period of weakness that will last for much of next year, given the size of inventories that must be reduced.

“A lot of people who had been sitting on the sidelines are beginning to move back into a buying mode, but we don’t look for things to turn up significantly until next summer,” said Nariman Behravesh, chief economist at Global Insight.

The backlog of unsold existing homes dropped 1 percent in November to 3.82 million units, which represented a 7.3-month supply at the current sales pace.

There also was good news on jobs yesterday as the Labor Department reported that the number of laid off workers filing applications for unemployment benefits rose by only 1,000 last week to 317,000. That’s a level that analysts said indicated the job market was remaining strong in spite of the slowdown in overall economic growth.

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