Home Sales, Values on the Rise; Consumer Confidence Down

Sales of new and existing homes rose in June for the third straight month, due primarily to low prices and attractive mortgage rates.  Home sales also rose 11 percent over the previous month. The federal tax credit for first-time homebuyers helped to drive the uptick.  Additionally, home prices rose for the first time in three years in May, a sign that the market might be stabilizing.

According to the Standard & Poor’s/Case-Shiller index, home prices have fallen more than 32 percent from their 2006 peaks.  The pace of the decline slowed in May for the fourth consecutive month.  “This could be an indication that home price declines are finally stabilizing” after plunging to levels last seen six years ago in 2003, noted David M. Blitzer, chairman of the S&P index committee.

On the downside, the weakening job market battered consumer confidence in July, possibly delaying a quick economic recovery.  The U.S. Conference Board’s consumer confidence index fell to 46.6 in July from 49.3 in June.  A recent Reuters survey had forecast that the June reading would be 49.  This erosion in confidence is in tune with the rising percentage of Americans who say jobs are hard to find.  Unemployment has hit a 26-year high, with several states reporting double-digit numbers.

“People are getting a bit discouraged.  Jobs are not coming as quickly as expected,” according to John Silvia, chief economist with Wells Fargo.  “This won’t be a V-shaped recovery for either the economy or the jobs market.”