Daily Economic Update for February 22, 2011

Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today's update, highlighting consumer confidence and the Case-Shilller/S&P home price index, is after the jump.

• The Case-Shilller/S&P home price index was released this morning. It shows a widespread deterioration in home prices as the 20-city index fell 1.0% from its November level. Of the 20 MSAs covered by the index, only 1 grew over this time period; Washington, DC rose 0.3%. Tampa on the other hand slid 2.6%, while Seattle was not far behind with a 2.0% decline. The national index finished 2010 down 4.1% for the 4th quarter compared to the 4th quarter of 2009.
• The monthly Case-Shiller/S&P index reflects prices from the 3-month period ending in December. Consequently, it is difficult to tell whether the index is being dragged down by weakness in December or earlier in November or even October. However, the share of distressed sales as reported by the NAR REALTORS® Confidence Index rose from 33% to 37% between November and January. These properties sell at a discount and will weigh on prices as their market share rises.
• Consumer confidence surged to 70.4 this morning, nearly a 7-point jump from the 64.8 level reported in January. The index for the current situation rose, but the bulk of the movement came in the index for expectations, which rose from 87.3 to 95.1. Consumers’ outlook on employment conditions improved modestly for the month. The report made no mention this month of consumers’ attitudes towards potential purchases of homes or autos.
• Today’s news is a mixed bag. The decline in home prices was not a surprise, but that makes it no less grim. Falling home prices puts pressure on underwater owners and can cause potential buyers to second guess the market. The downward trend in prices could result in an increase in delinquencies and foreclosures in the spring. Consumer confidence, though, could ameliorate this trend if home owners and buyers feel more confident in their ability to make payments.