Despite indications of stabilization in home prices, including prices of foreclosed homes for auction, consumer confidence declined in July to 46.6, compared to 49.3 in June, based on data published by the U.S. Conference Board.
In an earlier survey made by Reuters, a consumer confidence level of 49 was predicted.
The main reasons for the decline in consumer confidence are the continued rise of the unemployment rate, the continued layoffs and the reduction of household income due to reduced overtime and work hours.
Despite improvements in home affordability and the availability of low-priced foreclosed homes for auction, some potential home buyers are not pursuing their home purchase plans. Some think home prices will go down further; others think they might lose their jobs.
John Silvia, top economist of North Carolina-based Wells Fargo, said people are getting discouraged because of the job situation.
Home prices dropped by an average of over 32 percent from their highest levels in 2006, but the pace of their annual decline has slowed for the fourth consecutive month in May, based on the Standard & Poor’s/Case-Shiller Home Price Indexes released this week.
David Blitzer, head of the S&P index committee, said the slowdown in the index could be a sign that home price decreases are finally stabilizing.
Similarly, Janet Yellen, head of the Federal Reserve Bank of San Francisco, said in a meeting of bankers that there are signs the housing sector is stabilizing.
Some analysts are saying that the economy is already at its turning point. Steve Hagenbuckle, head of Florida-based private equity firm Terracap Partners which specializes in distressed real estate, said the good signs include improved home affordability levels, declining inventories, declining number of newly-built homes that compete with existing homes and increased competition in the real estate market.
Sales of new homes and existing homes in June both increased for the third consecutive month, as their prices were pushed down by lower-priced foreclosed homes for auction.
Nevertheless, economists warn that the unemployment rate is blocking recovery efforts. They also said that the pace of foreclosed homes for auction needs to slow down and potential home buyers need to realize that the time to buy is now.
Some U.S. stocks declined after the consumer confidence report was released, but the others, such as biotechnology stocks, recovered.
To accelerate housing market recovery, consumer confidence levels need to rise and encourage more people to buy existing homes and foreclosed homes for auction.
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