Americans sing housing blues
NEW YORK -- American consumers are gloomier about the economy than at any point since just before the U.S. invasion of Iraq, as slumping housing prices and soaring fuel costs depress consumer confidence to its lowest level in five years.
The Conference Board, a business-backed research group, said Tuesday its Consumer Confidence Index plunged to 64.5 in March from a revised 76.4 in February.
The March reading was far below the 73 expected by analysts surveyed by Thomson/IFR and was the worst reading since the gauge registered 61.4 in March 2003, just ahead of the U.S. invasion of Iraq.
Weakening consumer confidence foreshadows weakening consumer spending, which could hurt the already faltering economy.
Meanwhile, home prices plunged by record levels in January from a year ago, with almost no major cities immune from the spiraling market. The closely watched Standard & Poor's/Case-Shiller index of home prices in 20 cities fell nearly 11 percent in January from a year earlier, the biggest drop in its two-decade history.
Prices were down about 20 percent in Las Vegas and Miami, both paying the price for especially rampant speculation and too much new construction during the housing boom. The only bright spot was a 1.8 percent increase in Charlotte, N.C., where real estate agents say prices rose more modestly during the boom years and the regional economy is relatively strong.
"It's just a spiral that will end up taking this year to get out of," said Pava Leyrer, president of Heritage National Mortgage in Detroit, adding that the market there is not expected to improve until the spring of 2009.
The weak readings initially depressed Wall Street, but trading later flattened out. In early afternoon trading, the Dow fell 16.04, or 0.13 percent, to 12,532.60. The Standard & Poor's 500 index and the Nasdaq composite index rose slightly.
Economist Bernard Baumohl, executive director of The Economic Outlook Group in Princeton Junction, N.J., said consumers' pessimism "reflects the great anxiety that households have because there are just so many uncertainties that everyone faces."
He believes the economy fell into recession in the current quarter and growth probably won't resume until the second half of the year, after government stimulus programs have had a chance to work. These include measures by the Federal Reserve to boost credit markets and the plan by the Bush administration to distribute tax rebates starting this summer.
Baumohl said government actions should help the economy resume growth later this year but the recovery could be weak. "Even if we emerge from recession sometime this summer, the second half of the year is going to feel bad. For most people, they won't be able to tell if the economy is growing 1 percent or shrinking 1 percent."