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posted: 1/27/2010 12:01 AM

Home prices, confidence climb further

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Jan. 26 (Bloomberg) -- Home prices and consumer confidence in the U.S. climbed further from the depths of the recession, indicating the economy is taking more steps toward recovery.

The S&P/Case-Shiller home-price index increased 0.2 percent in November, the sixth consecutive gain, the group said today in New York. The Conference Board's confidence gauge rose this month to the highest level in more than a year.

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Home values since May have regained about a 10th of the record 32 percent plunge over the past three years, showing the industry that precipitated the worst economic slump since the 1930s has much ground to make up. A 10 percent jobless rate means Americans will be slow to regain the comfort needed to restore spending to levels seen during the last expansion.

"We are starting to come back, but it's going to be slow," said Stephen Stanley, chief economist at RBS Securities Inc. in Stamford, Connecticut. "The labor situation is the linchpin for practically everything."

Stocks dropped, erasing earlier gains, as shares of banks and telephone companies slumped. The Standard & Poor's 500 Index fell 0.4 percent to close at 1,092.17.

The S&P/Case-Shiller index was down 5.3 percent from November 2008, more than anticipated and the smallest year-over- year decline in two years.

A government tax credit for first-time home buyers due to expire in November helped boost home sales, contributing to higher prices in some markets. A projected increase in foreclosures this year as unemployment is slow to drop is a reminder that property values may not firm much more.

'Bottoming Out'

"We're seeing what looks to be a bottoming out in prices," said Michelle Meyer, an economist at Barclays Capital Inc. in New York. "There is a risk we see further downside, given the large amount of foreclosures set to enter the market and the uncertainty of the effects of the homebuyer tax credit on prices."

Economists surveyed anticipated prices would drop 5 percent in the 12 months to November, based on the median estimate of 27 projections. Estimates ranged from declines of 4.5 percent to 6 percent.

From the April 2006 peak, the 20-city index adjusted for seasonal variations was down 29 percent.

Compared with the prior month, 14 of the 20 areas covered showed an increase on a seasonally adjusted basis while six had a decline. The biggest month-to-month gain was in Phoenix, which increased 1.6 percent. New York showed the biggest drop at 0.9 percent.

Broad Improvement

All of the 20 cities in the S&P/Case-Shiller index showed a smaller year-over-year decline in November.

Four cities posted year-over-year gains in prices, led by Dallas, which saw a 1.4 percent rise from November 2008. San Francisco, Denver and San Diego rounded out the gainers.

A report today from the Federal Housing Finance Agency showed home prices rose 0.7 percent nationally in November from the prior month. The index tracks only loans that conform to Fannie Mae and Freddie Mac limits.

The Conference Board's confidence index increased to 55.9, higher than the median estimate of economists surveyed, from a revised 53.6 in December, the New York-based private research group said today. The figure reached a record low of 25.3 in February of last year and averaged 97.1 during the six-year expansion that ended in December 2007.

Confidence, Jobs

"It's a slight improvement, and given where consumer confidence has been the last four, five months, a slight improvement is a nice takeaway," said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. "It appears labor-market conditions are not getting any worse, and that's a plus."

Economists forecast confidence would rise to 53.5 from a previously reported 52.9 for December, according to the median of 67 projections in a Bloomberg survey.

The figures come as Federal Reserve officials meet today and tomorrow to discuss interest-rate policy. Fed Chairman Ben S. Bernanke and fellow central bankers will keep the target rate for overnight bank lending from zero to 0.25 percent to help nurture the recovery, according to the median estimate in a Bloomberg survey.

The U.S. lost 85,000 jobs last month after a revised 4,000 gain in November that was the first increase since the recession began in December 2007, according to Labor Department data released earlier this month.

Credit Card Use

American Express Co., the biggest U.S. credit-card issuer by purchases, said Jan. 21 that fourth-quarter profit more than doubled as consumer spending increased.

"We still face the challenge of high unemployment levels, depressed real estate values and shrunken household balance sheets, but the overall economy and our company are in stronger shape than they were a year ago," Kenneth I. Chenault, chief executive officer of New York-based AmEx, said in a news release.

"While the economic recovery now under way is likely to be modest, we expect it to continue," Chenault said.

For Related News and Information: Stories on U.S. homebuilders: TNI US HOM Top Bloomberg News real estate stories: TOPR Stories on the U.S. economy: TNI US ECO For homebuyer affordability: AFFD GP

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