U.S. housing prices, consumer confidence plunge in latest readings

Home prices and consumer confidence both dropped precipitouslyin their most recent U.S. soundings, according to figures released Tuesday.

The data area furtherindicationthat the economic maelstrom analysts had anticipated in the United States might have alreadybegun.

"Consumers are extremely pessimistic," said Lynn Franco, director of the Conference Board's consumer research centre.

"This news does not bode well for retailers who are already bracing for what is shaping up to be a challenging holiday season."

Scared consumers

The Conference Boardsaid its consumer confidence index for October hit its lowest level, at 38,since theNew York-based business think-tank began tracking shoppers in 1967.

The October figure was down 27 per cent from September and well below analysts' expectations of 52.

The drop represents the biggest month-over-month decline since 1973 and appears tostem from consumer sentiment regarding theongoing global financial crisis.

Retailers already have begun cutting prices in anticipation of a difficult Christmas and are likely to cut even further in the wake of the Conference Board's indicator.

Distressed homeowners

In equally troubling data released Tuesday, Standard& Poor's Case-Shiller index of home prices in 10U.S. cities slipped by 1.1 per cent in August comparedwith July and was down a record 17.7 per cent year-over-year,relative to August 2007.

Using a slightly broader calculation of 20U.S. cities, home prices were off one per cent month-to-month and 16.6 per centlast Augustcomparedwith August 2007.

Worse still, the house-price numbers arefrom themonth prior to September's financial meltdownand could mean home values will slip even further in the coming months.

One explanation for the poorer sales performanceis that, amid a widespread credit crunch, buyershave beenunable to raise enough cash to purchase new units. Alternatively, panicked sellers might have decided they urgently needed to sell their homes before valuations fall further.

In support of the second explanation, the California Association ofRealtors noted that home sales in the Golden Statealmost doubled in September compared to the same month one year earlier despite a year-over-year dropof 40 per cent in housing prices.

Recent numbers also indicated that U.S. foreclosures jumped morethan 70 per cent inthe third quarter of 2008 compared to the same year earlier.RealtyTrac, which followsU.S. housing foreclosures, said the 765,000 homes that were takenback by financing companies represented a 3.5 per cent increase versus the second quarter of the year.

The Standard& Poor's housing numbers, well followed within therealty sector, paint a more dismalpicture comparedwith recentU.S. statistics regarding the sale of new and existing homes, both of which increased unexpectedly in the most recent readings.