Case-Shiller: Home Prices Rising

U.S. home prices rose for the fourth consecutive month in August, according to the monthly Standard & Poors/Case Shiller Index, although rising unemployment and the pending expiration of the first-time homebuyer's tax credit raise doubts about whether the trend can be sustained.

Home prices in the S&P/Case Shiller 20-City Composite rose 1.2 percent in August, following a gain of 1.6 percent in July. Home values are now at approximately the same level as they were in August 2003, according to the report.

Prices remain 11.3 percent below their level of August 2008, according to the report, but the annual rate of decline continues to improve, having moderated from an approximately 19 percent annual rate of decline four months ago. Changes in the annual rate of decline are considered a more reliable indicator of current trends than monthly fluctuations are. In fact, for the past four months the annual rate of change has been rising more steeply than it fell during the collapse of housing prices beginning in 2006.

"Broadly speaking, the rate of annual decline in home price values continues to improve" said David M. Blitzer, Chairman of the Index Committee at Standard & Poor's. "While many of the markets remain down versus this time last year, the relative rate of decline has shown some real improvement"

"However, we do want to remind people of the upcoming expiration of the Federal First-Time Buyer's Tax Credit in November and anticipated higher unemployment rates through year-end," he continued. "Both may have a dampening effect on home prices."

Consumer confidence down

Consumers already appear to be nervous about the direction the economy is headed, despite signs of a potential recovery in recent months. A leading indicator of consumer confidence dropped unexpectedly in October, with perceptions of the job market hitting a 26-year low.

The Consumer Confidence Index, issued each month by the private economic research group the Conference Board, fell to 43.7, down from 53.4. Economists had expected the index to rise slightly. An index of 90 usually means a healthy economy.

The percentage of people who said jobs are hard to find by rose to 49.6 percent, the highest since 1983 and up from 47.0 percent in September. Only 10.3 percent said they expect their incomes to rise over the next six months, down from 11.2 percent in September, while 16.3 percent said they expect jobs to become more plentiful during that time, down from 18.0 percent the month before.