U.S. housing prices fell last quarter for the first time since 1991, but consumer confidence remains steady on job growth and rising stock prices. An S&P/Case-Shiller study released Tuesday reported the value of a house lost 1.4% in Q1 2007 against an 11.5% rise in Q1 2006. Thirteen of 20 cities posted price declines, led by Detroit (-8.4%) and San Diego (-6.0%). Goldman Sachs economists, who use the Case-Shiller index as a gauge, said in a note that they "remain comfortable with our forecast of house prices falling by 5% over 2007." Falling house prices coupled with soaring gasoline prices are raising concerns that consumer spending will slow, but the Conference Board's index of consumer confidence, also released Tuesday, showed a rise to 108 from April's revised 106.3. Though house prices have fallen over the past year, they are still up 157% from where they were 15 years ago. Nevertheless, the drop implies "there are just too many homes on the market," according to FTN Financial chief economist Christopher Low. David Seiders, chief economist for the National Association of Home Builders, said new home construction might take until 2011 to reach last year's level. "We've fallen way below trend because we soared way above trend during boom times," he said. "The upswing will be relatively slow, unlike earlier cycles."
Sources: Bloomberg (I, II), MarketWatch, Wall Street Journal, Money, MoneyCentral
Commentary: Housing Freefall Continues Unabated • New Home Sales Up (But Beware Double Digit Monthly Gains) • The National Association of Realtors Predicts the First Drop in Home Prices Since 1968
Stocks/ETFs to watch: Toll Brothers (NYSE:TOL), Hovnanian Enterprises (NYSE:HOV), KB Home (NYSE:KBH). ETFs: streetTRACKS SPDR Homebuilders ETF (NYSEARCA:XHB), iShares Dow Jones US Home Construction (BATS:ITB)
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