July 29 (Bloomberg) -- Home prices in 20 U.S. metropolitan areas fell at a faster pace in May, and consumer confidence stayed near the lowest level since 1992 this month, posing a threat to household spending.

The S&P/Case-Shiller home-price index dropped 15.8 percent from a year earlier, the biggest decline since records began seven years ago. The Conference Board's confidence index rose to 51.9, from 51 in June.

Home prices have fallen every month since January last year, eroding household wealth at a time when consumers are trying to cope with record fuel costs and the credit crunch. While both of today's figures were higher than economists' estimates, the reports still underscored forecasts for spending to slow in the second half as the stimulus from tax rebates wanes.

``It's definitely too early to break out the confetti,'' said Michael Feroli, an economist at JPMorgan Chase & Co in New York and a former researcher at the Federal Reserve. ``Household wealth is declining, and that should restrain consumer spending.''

Treasuries, which had fallen earlier in the day, extended losses. Benchmark 10-year notes yielded 4.05 percent at 4:14 p.m. in New York, from 4 percent late yesterday. The Standard & Poor's 500 Stock Index jumped 2.3 percent to close at 1,263.2. The dollar rose 0.9 percent against the euro to $1.5593.

Mortgage Rates

Stricter loan rules, rising mortgage rates and an increase in foreclosures are making it more difficult for prospective buyers to get financing, hurting home sales. The prolonged real- estate slump, along with higher fuel prices and a shrinking job market, is weighing on consumers and the economy.

Reports last week showed further declines in home sales. Purchases of existing homes, fell to the lowest level in a decade in June, the National Association of Realtors. New-home sales decreased 0.6 percent, the Commerce Department said. The report also showed that the number of unsold new properties dropped by the most since November 1963.

``The good news is clearing the inventory, the bad news is prices are going down,'' Karl Case, co-founder of the S&P/Case- Shiller home-price index, said in an interview with Bloomberg Radio today.

Home prices decreased 0.9 percent in May from the prior month after declining 1 percent in April, the report showed. The figures aren't adjusted for seasonal effects so economists prefer to focus on year-over-year changes instead of month to month. The year-on-year drop in April was 15.2 percent.

Economists' Forecasts

The home-price index was forecast to fall 16 percent from a year earlier, after a previously reported 15.3 percent drop in the 12 months ended in April, according to the median forecast of 25 economists surveyed by Bloomberg News.

``We're going to see continued declines in house prices, much more so in problem areas,'' said Mickey Levy, chief economist at Bank of America Corp. in an interview with Bloomberg Television in New York. ``By year-end, the inventories will be low enough, particularly in new homes, that we'll begin to see light at the end of the tunnel.''

The New York-based Conference Board's confidence index was forecast to fall to 50.1, from a previously reported 50.4 for June, according to the median estimate of 72 economists surveyed by Bloomberg News. Projections ranged from 45 to 55. June's reading was the lowest since February 1992.

Last week, the Reuters/University of Michigan final index of consumer sentiment for the month unexpectedly rose from the lowest level in 28 years. The gauge increased to 61.2 from 56.4.

Job Angst

``People are going to constrain their spending because they are still very worried about their jobs,'' said Russell Price, senior economist at H&R Block Financial Advisors Inc. in Detroit.

Economists in a monthly Bloomberg News survey forecast consumer spending will rise 0.2 percent next quarter, the smallest gain since 1991.

The share of people telling the Conference Board that jobs are hard to get increased to 30.3 percent from 29.7 percent in June. Those saying jobs were plentiful dropped to 13.5 percent this month from 14.1 percent.

For the second consecutive month, all of the 20 cities in the S&P/Case-Shiller index showed a year-over-year decrease in prices for May, led by 28 percent slumps in Las Vegas and Miami.

Monthly Change

On a month-to-month basis, 13 of the 20 areas covered showed a drop in home prices. The same two cities led the month- over-month decreases.

``Regional patterns stand out,'' David Blitzer, chairman of the index committee at S&P, said in a statement. Regions that once boomed, such as Miami and Las Vegas, are now showing the biggest declines, he said. Areas in the Midwest, including Detroit and Cleveland, are showing signs of economic stress.

The pickup in the pace of house-price decreases from last year contrasts with other private and government measures that indicated values were declining at a slower pace.

The median price of existing houses fell 6.1 percent in June from the same month last year, compared with an 8.5 percent decrease registered in the 12 months ended in April, according a report from the National Association of Realtors last week.

Prices of new homes, as reported by the Commerce Department, dropped 2 percent last month from June 2007. In the year ended in March, the decrease was 13 percent, the biggest in almost four decades.

Residential construction companies are struggling to stay profitable. Pulte Homes Inc., the third-largest U.S. homebuilder, reported a second-quarter loss of $158.4 million last week.

``We see no immediate signs of this housing downturn relenting,'' Pulte Chief Executive Officer Richard Dugas said in a conference call with analysts.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

Last Updated: July 29, 2008 16:17 EDT