U.S. home prices down in May, but consumer confidence strong

Tue Jul 29, 2014 5:10pm EDT
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By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. single-family home prices fell unexpectedly in May, declining for the first time in more than two years in the latest signal of the wobbly state of the housing market.

Still, U.S. consumers remained confident in the broader economic picture, with a key measure of consumer attitudes at its highest since October 2007 and views of the job market the brightest in six years.

The S&P/Case Shiller composite index of 20 metropolitan areas declined 0.3 percent in May on a seasonally adjusted basis, its first fall since January 2012. A Reuters poll of economists forecast a gain of 0.2 percent.

"The slowdown in price appears to be indicative of the weakening in housing activity more generally, particularly after the very slow start to the spring selling season," said Millan Mulraine, deputy chief economist at TD Securities in New York.

"However, while we are not particularly alarmed by the surprising drop in home prices, this report adds to a growing list of housing indicators that are beginning to point in the wrong direction, which could be a early warning signal that all may not be well in this crucial segment of the economy."

Meanwhile, U.S. homeownership rates continue to decline as financially squeezed Americans opt to rent, a separate report from the Commerce Department showed Tuesday. The seasonally adjusted homeownership rate fell to 64.8 percent in the second quarter of 2014 from 65.0 percent in the first quarter, marking the lowest level since the second quarter of 1995.

The U.S. housing market has been struggling for much of 2014, a lull blamed early in the year on harsh winter weather, but softness has persisted into the spring and summer, and many economists now expect housing to drag on economic growth this year.

"Housing has been turning in mixed economic numbers in the last few months," said David Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in a statement.   Continued...

A vacant home is shown in North Las Vegas, Nevada April 2, 2013.       REUTER/Steve Marcus