NEW YORK |
(Reuters) – Home prices rose for the fifth consecutive month in June, a fresh sign of improvement as the recovery in the housing market picks up steam.
But in a reminder of how fragile the broader economy remains, another measure of consumers’ economic views released on Tuesday deteriorated in August to the lowest in nine months as Americans were more pessimistic about business and labor market prospects.
The housing sector has been a bright spot, with the stabilization in prices since February suggesting the long-struggling market has finally turned a corner.
Still, the recovery is expected to be slow as the sector faces several hurdles, including ongoing foreclosures and a large number of underwater homeowners.
The S&P/Case Shiller composite index of 20 metropolitan areas gained 0.9 percent on a seasonally adjusted basis for June, topping economists’ forecasts for a 0.5 percent rise, according to a Reuters poll.
On a non-seasonally adjusted basis, prices were even stronger, up 2.3 percent.
Prices in the 20 cities rose 0.5 percent compared with the previous year, the first time year-over-year price changes were in positive territory since September 2010.
Atlanta fared the worst, tumbling 12.1 percent from a year ago. Hard-hit Phoenix continued to bounce back and was up nearly 14 percent.
“The fact that some of the areas hardest hit during the housing downturn, such as Florida, Arizona, and California, have seen gains in recent months is a positive sign that the gradual improvement in housing conditions is becoming somewhat broader based,” said Michael Gapen, senior U.S. economist at Barclays Capital in New York.
Financial markets showed little reaction to the data as investor attention remained on a highly anticipated speech from Federal Reserve Chairman Ben Bernanke at the end of the week.
Many analysts think the Federal Reserve could take more steps to bolster the economy as soon as the central bank’s next meeting in September. Bernanke’s speech at an annual gathering in Jackson Hole, Wyoming, will be scrutinized to see if he provides any clarity on the Fed’s next move.
Economic growth slowed to a 1.5 percent annualized rate in the second quarter, though a second reading on GDP on Wednesday is expected to revise that up slightly to 1.7 percent. Economists anticipate a pick-up in the second half of the year, though growth is still expected to be relatively lackluster.
CONSUMERS STILL GLOOMY
The Conference Board, an industry group, said its index of consumer attitudes fell to 60.6 from a downwardly revised 65.4 the previous month. Economists had expected a slight increase to 66 from July’s original reading of 65.9.
August’s figure was the lowest level since November.
The expectations index tumbled to 70.5 from 78.4, while the present situation index edged down to 45.8 from 45.9.
The decline suggested the recent rise in gasoline prices took a toll on consumers, said Paul Dales, senior U.S. economist at Capital Economics. The raft of tax hikes and spending cuts that are set to take effect at the beginning of next year may also be weighing on sentiment, he said.
“Although in recent years confidence has not been a very reliable leading indicator of actual consumption, the drop in August is nonetheless one more reason for the Fed to act boldly at its next meeting in mid-September,” said Dales.
Consumers’ labor market assessment was mixed. The “jobs hard to get” index eased to 40.7 percent from 41 percent while the “jobs plentiful” index also declined, to 7 percent from 7.8 percent.
But the view of the job market in the next six months was weaker, with 15.4 percent expecting to see more jobs, down from July’s 17.6 percent.
Consumers were more concerned about price increases. They expected inflation in the coming 12 months to climb to 5.9 percent, from 5.4 percent in the previous survey.
(Editing by Dan Grebler)