March 27 (Bloomberg) -- U.S. consumer confidence declined in March from a five-year high as gasoline prices rose, stocks fell and the housing recession showed few signs of ending.

The New York-based Conference Board's index of consumer confidence retreated more than forecast to 107.2, from 111.2 in February. The survey also said fewer Americans planned to buy a house, while the S&P/Case-Shiller index showed home prices dropped in January for the first time in at least six years.

The reports pushed stocks lower as investors fretted that consumer spending, which is carrying the five-year economic expansion, will weaken. The Conference Board also observed that jobs are plentiful, suggesting rising wages may yet shield most consumers from the worst of the housing downturn.

``Gas prices are weighing on confidence, and the stock- market volatility and all the reports on the subprime mortgage fiasco are also shaking people,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. At the same time, ``prospects for continued income gains and consumer spending still look pretty good.''

The Standard & Poor's 500 Index fell 8.89 points, or 0.6 percent, to 1428.61. The 10-year Treasury note was little changed to yield 4.61 percent at 4:33 p.m. in New York. Economists anticipated the confidence index would fall to 108.5 from an originally reported 112.5 the prior month, according to the median of estimates in a Bloomberg News survey.

``We're looking for moderation in consumer spending, but we're not looking for any sharp, sudden clamping of purses or wallets that could push the overall economy into a recession,'' said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh.

Prices Retreat

Home values in 20 American metropolitan areas dropped 0.2 percent in January from a year earlier, according to S&P/Case- Shiller. The decrease was the first since the group started keeping year-over-year records in January 2001.

The numbers follow a report yesterday that showed new-home sales at the lowest level in almost seven years as builders struggled with a glut of unsold dwellings. Falling prices make it harder for owners to borrow against home equity and may make lenders even more wary as delinquencies climb.

Lennar Corp., the largest U.S. homebuilder by revenue, said today that earnings plunged 73 percent in the fiscal first quarter. The Miami-based company also said that it will likely miss its 2007 profit forecast.

Stock Swings

Gyrations in stock prices may also be making consumers queasy. The Dow Jones Industrial Average dropped more than 400 points on Feb. 27 after a sell-off in China spread throughout the world and former Federal Reserve Chairman Alan Greenspan warned of the possibility of a recession. The Dow posted its biggest gain in eight months on March 21, wiping away most of the losses of the year, after the Fed indicated it was no longer leaning toward raising interest rates.

The Conference Board's measure of present conditions rose to 137.6, the highest since August 2001, from 137.1 in February. The gauge of expectations for the next six months dropped to 86.9 from 93.8.

``One of the fallouts from the subprime woes is going to be losses of jobs and that always has a negative impact on consumer confidence,'' Lynn Franco, the survey's director, said in an interview from New York. ``That's a dark cloud hanging over expectations.''

Still, she said the current conditions index didn't suggest any weakening in economic conditions. ``We should focus on what that reading will be in April and May,'' Franco added. ``If we see a deterioration there, then it could spell trouble.''

Labor Market

The share of consumers who said jobs are plentiful rose to 30.5 percent in March, the highest since August 2001, from 27.8 percent in February. The proportion of people who said jobs are hard to get rose to 19.1 percent from 17.9 percent.

The proportion of people who expect their incomes to rise over the next six months fell to 17.5 percent from 19.2 percent. The share expecting more jobs fell to 12.7 percent from 13.3 percent.

The Conference Board's index has fared better than other confidence measures in recent months because it tends to be more influenced by consumer attitudes about the state of the labor market, economists said. Still, news of increasing mortgage delinquencies and stagnant home values is instilling unease.

University of Michigan

A preliminary survey by Reuters/University of Michigan released earlier this month showed sentiment fell to 88.8, a six-month low, from 91.3 in February. Another measure, the ABC News/Washington Post confidence index, posted its biggest decline since February 2004 for the week ended March 18.

So far, consumer spending, which accounts for more than two-thirds of the economy, continues to grow. Spending may expand at a 3.2 percent pace this quarter, compared with a 4.2 percent rate the previous three months, according to the median forecast of economists surveyed by Bloomberg News earlier this March. Spending has averaged 3.3 percent gains since 1990.

Still, increasing gasoline prices are having some effect. Retail sales rose less than forecast last month as higher fuel costs limited spending on other goods, a Commerce Department report earlier this month showed. Sales rose 0.1 percent following no change the prior month.

Fuel prices are up even more this month. The average price of a gallon of regular gasoline at the pump rose to $2.58 as of March 25, the highest since September, according to figures from the American Automobile Association. The average price this month is up 12 percent from February.

Mortgage Defaults

Another concern may be rising mortgage defaults. Home foreclosure filings last month jumped 12 percent compared with a year ago as owners struggled with declining home values and higher adjustable mortgage rates, according to a report yesterday from RealtyTrac, an online listing of foreclosed properties.

Defaults among so-called subprime borrowers, those with poor or limited credit records, are probably behind the increase, economists said.

The limited size of this market suggests it's not a threat to the entire economy, Fed policy makers have said.

While assessing the full effect will take time, currently ``there are few signs that the disruptions in this one sector of the credit markets will have a lasting impact on credit markets as a whole,'' Fed Bank of New York President Timothy Geithner said yesterday.

Only about 15 percent of the more than $9.5 trillion of outstanding U.S. home mortgages are subprime loans, according to bond analysts at Bear Stearns Cos.

One reason for optimism is jobs. The economy created 97,000 jobs in February, and payroll figures for the previous two months were revised higher, the Labor Department said earlier this month. Hourly wages rose 4.1 percent in February from a year earlier and unemployment dropped to 4.5 percent, approaching a six-year low.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net; Shobhana Chandra in Washington at schandra1@bloomberg.net

Last Updated: March 27, 2007 16:34 EDT