Housing Continues At Risk

“On a year-over-year basis home prices have now increased for the fourth straight month, following more than three years of declines. Home prices troughed a year ago and have increases by 4.6% since then. In a few regions, home prices are increasing fairly quickly. Even in those areas where housing boomed the most, the rate of home price decline has slowed significantly,” according to Steve Wood, chief economist at Insight Economics, LLC.

Factors that Wood says place housing at risk of another dip:

• Unemployment remaining high;
• Mortgage delinquencies still climbing;
• Mortgage rate resets on Alt-A and Option ARM loans due to take place over the next year.

Consumers Are Worried

Consumer Confidence Index fell by 3.9 points in July to 50.4%, compared with market expectations for a somewhat smaller decline to 51.0%.

Two components of the Index; Present Situation and Expectations both fell by 0.7% and 6.1 points, respectively.

“Consumer assessments of the economy collapsed between October 2008 and February 2009 to their lowest level in 41 years that data have been collected. Between February through May 2009, confidence improved moderately but it has only been inching higher (on a trend basis) since then and the level of confidence is still subdued…Confidence is still deeply mired in recessionary territory,” says Wood.

Wood believes much of the weakness is due to:

• High unemployment;
• Soft housing prices;
• Rising foreclosures;
• Tight credit standards and;
• High gasoline prices.

“Although the economy is growing again, consumer attitudes are lagging behind broader economic developments.”