Aug. 28 (Bloomberg) -- Consumer confidence fell in August by the most since just after Hurricane Katrina two years ago, as tumbling stock prices and lower home values left Americans feeling less wealthy.

The New York-based Conference Board's index of confidence declined to 105 from 111.9 in July. Economists had expected a reading of 104, according to a Bloomberg survey. Earlier today, another report showed home prices in the U.S. dropped by a record amount in the second quarter.

The housing recession is making it harder for Americans to tap home equity to finance the spending that accounts for 70 percent of the economy. A slowdown in hiring and slimmer pay raises may further weaken consumer sentiment and buying power.

``The things that are weighing on the consumer are getting pretty imposing,'' said Gregory Miller, chief economist at SunTrust Banks Inc. in Atlanta, which last week announced job cuts. ``The equity that he's generated in his house over the years has been undercut'' by falling prices.

The Conference Board report comes after S&P/Case-Shiller's index showed home values dropped 3.2 percent in the three months through July from the same period a year before. The Case- Shiller report also showed that prices in June in 20 U.S. metropolitan areas fell 3.5 percent from a year before. The decline compares with a 2.9 percent year-over-year drop in May.

After the reports, the yield on the benchmark 10-year U.S. Treasury note was unchanged at 4.56 percent. Stocks were lower.

Economists surveyed by Bloomberg News forecast the Conference Board index would decline to 104 from an originally reported July reading of 112.6, according to the median estimate in a survey of 73 economists. Estimates ranged from 99 to 108.

Current Conditions, Expectations

The Conference Board's measure of present conditions fell to 130.3 from 138.3 in July. The gauge of expectations for the next six months dropped to 88.2 from 94.4.

The share of consumers who said jobs are plentiful declined to 27.5 percent in August from 30 percent in July. The proportion of people who said jobs are hard to get rose to 19.7 percent from 18.7 percent.

The proportion of people who expect their incomes to rise over the next six months slipped to 19.1 percent from 19.2 percent. The share expecting more jobs fell to 13 percent from 13.8 percent.

The Conference Board's index tends to be more influenced than other sentiment gauges by consumer attitudes about the state of the labor market, economists said.

Other confidence measures have also showed declines.

Michigan Index

The Reuters/University of Michigan preliminary index of consumer sentiment fell to its lowest in a year this month, it reported Aug. 17.

The ABC/Washington Post Consumer confidence index fell to minus 20 in the week ending Aug. 19, its lowest level since October 2005.

Plunging stock prices in the wake of a global credit crunch helped undermine consumer sentiment. The Standard & Poor's 500 index fell as much as 9.4 percent from its July 19 historic high to Aug. 15, when it started to recover.

The labor market, while resilient, is showing signs of weakening. Unemployment rose in July to 4.6 percent from 4.5 percent, still near the lowest in six years. Job growth slowed to 92,000 last month from 126,000 the prior month, down from last year's average of 189,000 a month. Growth in hourly earnings slowed to 3.9 percent in July from a year earlier, down from a nine-year high of 4.3 percent in December.

Consumer Spending

Consumer spending growth will probably average a 2.5 percent pace in the second half of 2007, unchanged from the first six months, according to economists surveyed by Bloomberg News. That's down from a 3.4 percent pace in the last half of 2006.

The worst housing recession in 16 years is weakening consumer spending and costing jobs. Sales of previously unsold homes fell in July for a fifth month, their lowest in nearly five years, while the glut of unsold homes rose to a 16-year high, the National Association of Realtors reported Aug. 27.

As global credit markets seized up on concerns over the pricing of commercial paper backed by subprime mortgage loans, the Federal Reserve on Aug. 17 announced a surprise cut in the discount rate. The Fed said downside risks to growth had ``increased appreciably,'' in a statement interpreted by investors as signaling a move away from its tightening bias.

The credit crunch is costing jobs. San Diego-based Accredited Home Lenders Holding Co. on Aug. 22 said it would close more than half its operations and fire about 1,600 people.

Two days before, Atlanta-based SunTrust said it planned to cut about 2,400 employees this year because of declining profit from retail and commercial banking.

Weaker home prices translate into slowing car sales, said Michael Jackson, chief executive officer of AutoNation Inc., the largest U.S. auto retailer, said in a July 26 interview from Fort Lauderdale, Florida.

``There is a direct link between housing and the distress it creates around consumers for big-ticket items,'' said Jackson.

Still, falling gasoline prices have provided consumers with some relief. Prices of regular unleaded gasoline fell from as high as $3.05 a gallon last month to $2.78 a gallon on Aug. 22. Prices are still up 30 percent from their lows for 2007 of $2.14 a gallon on Jan. 24.

To contact the reporter on this story: Bob Willis Washington at bwillis@bloomberg.net.

Last Updated: August 28, 2007 10:32 EDT