By Tim Mullaney, USA TODAY
Housing prices rose in most of the country in April, as record low mortgage rates and some of the cheapest housing prices in decades spurred some long-desired home sales, while consumer confidence dropped in June for the fourth straight month as fewer consumers predicted the economy will pick up later this year.
The S&P/Case-Shiller composite index of U.S. home prices rose 1.3% for the month. The index fell 1.9% for the year that ended in April, Standard & Poor's reported today. The Conference Board reported that consumer confidence fell to 62.0, on an index where 100 represents how confident consumers were in the boom year of 1985. The house-price gain was larger than economists had expected, while consumer confidence was lower than forecasts.
"All the headlines are positive on house prices, and this is important because they've been going down for five years," said UBS Investment Research economist Maury Harris. "It's a confidence bulder at a time when Americans really need something good happening."
Home values rose in nearly all U.S. major cities -- 18 of the top 20 -- that the index follows, the bond-rating company said. The drop is far smaller than in the previous two months when year-over-year declines registered -2.9% and -2.6%.
Some economists may think the April gains reflect a shift in the market to include fewer distress sales, which typically command lower prices, Harris said. He thinks that's incorrect, saying federal statistics that exclude most short sales and foreclosures have also risen for the last two months.
The report is one of the first upbeat signals about the housing market, which helped cause the nation's recession from 2007 to 2009 and until recently has continued to be a drag on the broader economy. On Monday, the government said that new homes sales rose at the fastest pace in two years in May.
"With April 2012 data, we finally saw some rising home prices," says David M. Blitzer, chairman of the Case-Shiller index committee at S&P Indices. " ... While one month does not make a trend, particularly during seasonally strong buying months, the combination of rising positive monthly index levels and improving annual returns is a good sign.
The Case-Shiller outlook is about the same as forecasts from other experts. A group of 114 economists, executives and strategists surveyed for real-estate Web site Zillow.com expect U.S. home prices to fall 0.4% this year.
In a report on June 22, Trulia.com chief economist Jed Kolko said the housing recovery had hit a plateau in recent months, based on existing home sales, foreclosure rates and construction starts.
The question is whether consumers' weak confidence in the future will translate into slower consumer spending in upcoming months, Moody's Analytics economist Timothy Daigle wrote in a report.
Consumers' confidence in the economy's, which had declined in May, fell further in June. The index now stands at 62, which suggests that consumers believe the economy is still falling but their faith in that belief has eroded considerably in recent months.
According to the index, consumers were somewhat more positive about current conditions, but slightly more pessimistic about the short-term outlook. Income expectations, which had improved last month, declined in June. If this trend continues, spending may be restrained in the short-term, the report said.