Thread: Consumers fret as U.S. home prices fall at record pace

By Steven C. Johnson

NEW YORK (Reuters) - U.S. home prices plunged at a record pace in December and consumer confidence hit a new low in February, data showed on Tuesday, as Federal Reserve Chairman Ben Bernanke warned the recession could extend beyond this year.

The Conference Board, an industry group, said its consumer confidence index fell to 25.0 in February, the lowest since the index began in 1967, from 34.7 in January.

Consumers' gloomy outlook showed no sign of turning around, according to the report, boding ill for the consumer spending that drives some two-thirds of the U.S. economy.

The data "suggests, unfortunately, that we still haven't found the bottom for the economy," said Zach Pandl, economist at Nomura Securities International in New York.

In testimony to Congress, Bernanke said that unless government efforts helped restore financial stability, the U.S. recession may not end this year.

"Bernanke certainly paints a more dire picture than the market was initially anticipating," said Kevin Flanagan, fixed-income strategist for Global Wealth Management Morgan Stanley. "He is talking about a non-recovery in 2010 if markets and banks don't stabilize."

But the Fed chief also said big U.S. banks would survive the downturn without being nationalized, sparking some optimism in financial markets.

That helped Wall Street rally in spite of the dire economic news as investors snapped up shares on the cheap after Monday's swoon sent the Dow industrials to a 12-year low.

MORE HOUSING WOES

The day's U.S. housing data also offered little reason for optimism. Prices of U.S. single-family homes fell 18.5 percent in December from a year earlier, with the pace of decline speeding up, according to the S&P/Case Shiller home price index.

That was the biggest drop since the data series began 21 years ago and suggested prices will probably continue falling in the months ahead, extending a 13-month-old recession.

The S&P/Case Shiller composite index of home prices in 20 metropolitan areas fell 2.5 percent after dipping 2.3 percent in November.

"There are very few, if any, pockets of turnaround that one can see in the data," said David Blitzer, chairman of S&P's index committee. "Most of the nation appears to remain on a downward path."

A separate report from the Federal Housing Finance Agency said single-family home prices fell a record 4.5 percent in the last three months of 2008 compared with a year earlier, though the pace of decline slowed.

The S&P/Case Shiller data showed that prices have plummeted 26.7 percent from the housing market peak in the second quarter of 2006.

Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut, said a rising jobless rate, limited access to credit and an overhang of unsold homes will conspire to keep prices headed lower in the months ahead and potential buyers on the sidelines.

"Cheap just does not do it, at least while expectations that it will get cheaper are entrenched," he said.

The U.S. economy has shed more than 3 million jobs since the beginning of 2008.

(Additional reporting by Al Yoon, Chris Reese, Ellis Mnyandu. Mark Felsenthal and Alister Bull; Editing by Dan Grebler)

http://www.reuters.com/article/topNews/ ... dChannel=0

The U.S. economy has shed more than 3 million jobs since the beginning of 2008.

Plus imported 2 million more workers! End result is 5 million unemployed Americans for 2008.

Originally Posted by Bowman

The U.S. economy has shed more than 3 million jobs since the beginning of 2008.

Plus imported 2 million more workers! End result is 5 million unemployed Americans for 2008.

The numbers are staggering!!!