Home Sales, Consumer Confidence Decline in U.S.
Sales of previously owned homes fell to their lowest levels in almost four years and declining home prices hurt consumer confidence this month, indicating the U.S. economy is struggling to get rolling following its first fiscal quarter slowdown.
Existing home sales slid 8.4 percent in March after rising 3.7 percent the previous month, the National Association of Realtors said Tuesday.
A separate private report showed home price declines in 20 major cities worsened in February. The Conference Board’s consumer confidence index fell to 104, from 108.2.
Slowing housing and deteriorating confidence pose a risk that the economy, which is projected to have grown last quarter at the weakest pace in more than a year, won’t accelerate in coming months. The dollar dropped and benchmark Treasury yields reached their lowest level this month.
“The housing downturn is now weighing increasingly heavily on the U.S. economy,” said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.
“It’s starting to have an impact on consumers’ psyche and also consumer spending. The second quarter is going to be no better than the first.”
Overall, home purchase loan activity declined as purchases of existing homes dropped last month to an annual rate of 6.12 million, from 6.68 million in February, the biggest decline since January 1989.
David Lereah, chief economist at the National Association of Realtors, said that home sales fell 11.3 percent compared with a year earlier.
Federal Reserve policy makers, including Chairman Ben S. Bernanke, have stated repeatedly this year that the housing market presents a risk to their outlook for “moderate” growth.
Still, officials reiterated at last month’s meeting that inflation is still their bigger concern and said higher mortgage interest rates may still be needed. The Fed next meets May 9.
Resales were forecast to drop 4.3 percent last month to a 6.40 million rate - down from February’s originally reported 6.69 million, according to the median estimate in a Bloomberg News survey of 66 economists.
The decline in sales, while partly weather-related, may renew concern that the housing recession will linger. Subprime (bad credit mortgage) defaults are rising, and owners’ reluctance to reduce home prices may keep more and more unsold properties on the market.
“The negative impact of subprime home loan lending is considerable,” Lereah said at a briefing. ‘We expect sales to be sluggish in the second quarter.”
Consumer confidence declined to the lowest level in eight months in April, undercut by concerns about rising gasoline prices and the wave of mortgage defaults.
This year’s 23 percent increase in gasoline prices is taking a bite out of Americans’ wallets, and a lingering housing market slump threatens to further erode wealth. The Fed is counting on an expanding job market to keep consumers spending.
SOURCE: Bloomberg News