The U.S. housing market is showing signs of falling deeper into a slump that could weigh on the nation's economic recovery.
Home prices nationwide were down 1.5% in the third quarter, compared with a year ago, according to the S&P/Case-Shiller home-price index released Tuesday. The drop reflects the sharp fall in home sales after government home-buying tax credits expired earlier this year. Prices fell even more, by 2%, in the third quarter, compared with the second quarter.
Ase-Shiller's composite index for 20 major U.S. cities fell 0.7% in September, compared with August, not adjusted for seasonal variations. The biggest decline was in Cleveland, where prices fell 3% in September, compared with August. Minneapolis, Portland, Ore., and Phoenix were also big losers, with monthly price declines between 2.1% and 1.5%.
The best showing was in Washington, D.C., where prices increased 0.3% in September from August.
Despite an improving job market and growth in consumer spending, home prices and sales have stayed consistently depressed through the economy's year-old recovery. The expiration of federal tax credits for home buyers, problems in foreclosure processing and an unemployment rate still at 9.6% have kept buyers at bay and prompted sellers to cut prices.
Those drawbacks, combined with a large stock of unsold homes and distressed sales that hold down prices, have left new-home sales and construction near historic lows.
Consumer Confidence Grows
"The housing market is stuck at the bottom, and we've been stuck there for months," said Patrick Newport, an economist at IHS Global Insight.
A separate report Tuesday showed that consumers are feeling a bit better about the economy in spite of the woeful housing market. The Conference Board, a private research group, said its index of consumer confidence increased to 54.1 in November from 49.9 in October. While confidence remains low by historical standards, the November reading was the highest since June.
Consumers were more optimistic about the business conditions in the near future. Those anticipating improving conditions in the next six months rose to 16.7% from 15.8%, while those expecting worsening conditions declined to 12.1% from 14.4%.
Views on the labor market also improved slightly. The percentage of consumers who expected more jobs in the months ahead rose to 15.5% from 14.5%. The proportion expecting fewer jobs fell to 18.8% from 22.3%.