By Jason Simpkins
Associate Editor
Another fresh round of economic data was released yesterday (Tuesday) with the prognosis looking dire for the U.S. economy.
Home prices as measured by the S&P/Case Shiller composite index of 20 metro areas fell 1.4% in April from March and slumped by a record 15.3% over the year. The group's composite index of 10 metro areas dropped 1.6% in April, making for a record 16.3% annual drop.
According to the S&P, 13 of the top 20 metro areas are still posting record annual declines with price losses in the double digits for half of the areas.
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"The potential is a vicious cycle which we may already be experiencing. Falling home prices are leading to more foreclosures, which cause a further decline in prices," Richard DeKaser, chief economist at National City Corp. (NCC) in Cleveland, told Reuters.
The only bright spot to be found in the data was that the 20-city month-over-month decline was the smallest drop since the August-September 2007 period.
"If there is anywhere to look for possible improvement, it would be that the pace of monthly declines has slowed down for most of the markets," David Blitzer, chairman of the Index Committee at Standard & Poor's, said in a statement.
Meanwhile a separate report from the Conference Board indicated consumer confidence had hit its lowest level in 16 years.
The Conference Board said its overall monthly index tumbled to 50.4 this month, its lowest point since hitting 47.3 in February 1992. The index measured a revised 58.1 in May.
Most analysts agree that consumer spending has held up relatively well in recent months, but that is easily attributable to the $50 million in economic stimulus payments the U.S. government sent out in May. Also, annual tax refunds have been coming in after the April tax season.
"Getting both [checks] at this time of year has led to an increase in household spending, but I expect this to be temporary. I'm looking for spending to trail off in the latter part of the summer," Bernard Baumohl, an economist at the Economic Outlook Group, told CNNMoney. "If consumers are not spending, then the economy is in serious trouble. I think we're in a recession right now."
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Reuters:
Home prices extend record slide in April: S&P