Confidence among American consumers fell in May to the lowest level since 1992 as the two-year housing slump showed no sign of bottoming.
The Conference Board’s confidence index declined more than forecast to 57.2, the New York-based research group said Tuesday. The S&P/Case-Shiller home-price index dropped 14.4 percent in March from a year earlier, the most since the figures were first published in 2001.
Separate figures from the Commerce Department showed sales of new homes in April were the second lowest since 1991.
The slide in home values, along with gasoline near $4 a gallon and rising unemployment, threatens to hobble the consumer spending that accounts for more than two-thirds of the economy.
“When confidence is as bad as it is on the consumer side, it’s hard to believe we’re going to be buying a lot of homes in the near term,” said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis, Minnesota. “The drag from home-price declines, the credit crunch and oil prices will probably be more severe than some had forecast earlier in the year.”
The Conference Board’s index of present conditions dropped to 74.4 in May from 81.9 in April. A gauge of expectations for the next six months declined to 45.7 from 50.0 the prior month, the report showed.
The projected inflation rate a year from now soared to a record 7.7 percent, the survey showed.
“Until you start to see some declines in energy prices and labor markets come back, these numbers are going to look pretty soggy,” said Jay Bryson, a global economist at Wachovia Corp. in Charlotte, N.C.
Sales of new homes increased 3.3 percent in April after readings for the prior month were revised lower, the Commerce Department's report showed. The April sales pace was an annual 526,000 homes, compared with a 509,000 rate in March that was the lowest in 17 years.
Economists forecast new home sales would drop to a 520,000 annual pace from an originally reported 526,000 rate the month earlier, according to the median estimate.
One bright spot is that inventories decreased. The supply of homes at the current sales rate dropped to 10.6 months’ worth from 11.1 months in March. The number of homes completed and waiting to be sold decreased to 181,000, the fewest since July.
Property values may drop more than 30 percent from their peak in 2006, Robert Shiller, an economics professor at Yale University and co-creator of the S&P/Case-Shiller housing-price index, said last month.
The Case-Shiller index of prices in the 20 largest metropolitan areas was down 17 percent through March, from the record set in July 2006.
Karl Case, who co-founded the index with Shiller, said the rapid price declines reflected auction sales of foreclosed properties, which were helping to clear the glut of unsold homes.
“Banks don't wait around,” he said Tuesday on Bloomberg Radio. “They put it on the market and get rid of it. That means prices adjust more rapidly.”
The slide in prices may already be contributing to a recovery in demand in some areas. Sales in the San Francisco region jumped 29 percent from the previous month, the biggest April gain in at least 20 years, according to DataQuick Information Systems in San Diego. The median price was $518,000, down 22 percent from the $655,000 peak in June and July 2007, the real estate data company said.
Even so, the percentage of consumers planning to buy a home in the next six months dropped to 2.1 percent from 2.5 percent, the Conference Board's survey showed.
The share of consumers who said jobs are plentiful fell to 16.3 percent from 17.1 percent last month. Those saying jobs are hard to get increased to 28.0 percent from 27.9 percent.
Employers cut 20,000 workers in April, bringing the decline in payrolls so far this year to 260,000, according to the Labor Department.
The proportion of people who expect their incomes to rise over the next six months decreased to 13.4 percent, the lowest level since records began in 1967, according to the Conference Board survey. The share expecting more jobs dropped to 8.7 percent from 8.8 percent.
Industry-wide, U.S. sales of cars and light trucks fell to 4.83 million in the first four months of the year, the lowest level since 1995, according to Autodata Corp.
“With the prospect of $4-a-gallon gasoline on the horizon, this combination of economic stress with the gasoline prices is really having an impact on overall volume,” said Michael Jackson, chief executive officer at AutoNation Inc.
Another confidence measure, the Reuters/University of Michigan index of consumer sentiment issued last week, fell in May to the lowest level in almost 28 years.
— Bloomberg News