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U.S. Home Prices Likely Dropped at Slower Rate

Home prices in 20 U.S. cities probably fell at a slower pace and consumer confidence climbed, signs of resilience in the economy heading into 2012, economists said before reports today.

The S&P/Case-Shiller index of property values dropped 3.2 percent in October from the same month in 2010, the smallest year-over-year decrease since January, according to the median forecast of 20 economists surveyed by Bloomberg News. The Conference Board’s confidence gauge rose to a five-month high of 58.6 in December from 56 the previous month, separate figures may show.

Rising builder confidence, a decline in the number of unsold properties on the market and a pickup in construction suggest stabilization in the housing market early next year. Still, the unemployment rate at 8.6 percent and the prospect of another wave of foreclosures represent obstacles for residential real estate and consumer sentiment.

“The housing market is evidently making a turn for the better,” said Richard DeKaser, deputy chief economist at the Parthenon Group Inc. in Boston. “November saw some pretty strong momentum heading into yearend, with consumers looking up.”

The S&P/Case-Shiller index (S15HOME), based on a three-month average, is due at 9 a.m. New York time. Survey estimates ranged from declines of 2.4 percent to 3.5 percent.

The New York-based Conference Board’s consumer confidence measure is due at 10 a.m. The Bloomberg survey median was based on 61 estimates that ranged from 52 to 63.

Confidence Measures

Increased optimism has been evident in other data. The Bloomberg Consumer Comfort Index improved to minus 45 in the period ended Dec. 18 from a reading of minus 49.9 the prior week, marking the biggest seven-day gain since January. The Thomson Reuters/University of Michigan index of consumer sentiment rose to a six-month high in December.

Better job prospects and lower gasoline prices may be helping brighten consumers’ moods.

Employers boosted payrolls by 120,000 workers in November and the jobless rate unexpectedly fell to 8.6 percent, according to Labor Department figures earlier this month. The price of regular unleaded gasoline at the pump fell to $3.22 on Dec. 22, from $3.43 at the beginning of November, according to AAA, the biggest U.S. auto group.

Faster job growth may be needed to spur enough home sales to reduce inventory and push up property values. The Case- Shiller report will show home prices, after adjusting for seasonal variations, fell 0.3 percent in October from the prior month, according to the survey median.

Year-Over-Year

The year-over-year gauges provide better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.

Those gains have buoyed builders’ stocks since the end of the third quarter. The Standard & Poor’s Supercomposite Homebuilding Index, which includes Toll Brothers Inc. and Lennar Corp., has climbed 32 percent, while the broader S&P 500 has increased 12 percent.

Some homebuilders say an increase in sentiment is needed to help boost sales.

“We need a higher level of confidence to get back to the traditional move-upstream or first-time buyer out of the rental,” Jeffrey Mezger, chief executive officer of KB Home (KBH), said on a Dec. 21 conference call with analysts. “A lot of consumers are surprised, frankly, at how low home payments are compared to rent.”

Policy makers are promoting programs designed to reinvigorate the housing market. The Obama administration this month started a new version of the federal Home Affordable Refinance Program, or HARP, after the original plan helped less than a quarter of the people targeted to lock in lower mortgage rates.

Officials at the Federal Reserve this month reiterated that they will keep the benchmark interest rate near zero until at least mid-2013. The central bank in September decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.

                Bloomberg Survey

===========================================
                         Case Shil Consumer
                           Monthly     Conf
                              YOY%    Index
===========================================
Date of Release              12/27    12/27
Observation Period            Oct.     Dec.
-------------------------------------------
Median                       -3.2%     58.6
Average                      -3.1%     58.4
High Forecast                -2.4%     63.0
Low Forecast                 -3.5%     52.0
Number of Participants          20       61
Previous                     -3.6%     56.0
-------------------------------------------
4CAST                        -3.5%     58.5
ABN Amro                      ---      59.0
Action Economics              ---      53.0
Aletti Gestielle              ---      58.0
Ameriprise Financial          ---      57.0
Banca Aletti                  ---      55.2
Banesto                      -3.3%     57.8
Bayerische Landesbank        -3.3%     59.0
BMO Capital Markets          -2.8%     58.0
BNP Paribas                   ---      52.0
Capital Economics            -3.2%     60.0
Citi                          ---      60.0
ClearView Economics           ---      59.0
Comerica                      ---      56.0
Commerzbank AG               -3.3%     58.0
Credit Agricole CIB           ---      58.0
Credit Suisse                 ---      63.0
Daiwa Securities America      ---      57.0
Danske Bank                   ---      56.0
DekaBank                      ---      59.0
Desjardins Group             -2.8%     58.0
Deutsche Bank Securities     -3.3%     60.0
Deutsche Postbank AG          ---      59.0
Exane                         ---      58.6
First Trust Advisors          ---      60.7
Helaba                        ---      58.0
HSBC Markets                  ---      57.0
Hugh Johnson Advisors         ---      61.0
IDEAglobal                   -3.2%     58.0
IHS Global Insight           -3.4%     63.0
Informa Global Markets        ---      56.8
Insight Economics            -3.0%     59.0
Intesa-SanPaulo               ---      59.0
J.P. Morgan Chase            -3.1%     60.0
Jefferies & Co.               ---      60.0
Landesbank Berlin             ---      59.5
Landesbank BW                 ---      58.0
Moody’s Analytics             ---      61.0
Morgan Stanley & Co.          ---      60.0
National Bank Financial       ---      59.0
Natixis                      -2.4%     58.2
Nomura Securities             ---      58.9
Nord/LB                       ---      57.0
Parthenon Group              -3.3%     57.2
Pierpont Securities           ---      59.0
PNC Bank                      ---      58.0
Raiffeisenbank International  ---      56.0
Raymond James                 ---      58.0
RBC Capital Markets           ---      60.0
RBS Securities                ---      61.5
Scotia Capital                ---      56.5
SMBC Nikko Securities        -3.2%     60.0
Societe Generale             -3.5%     63.0
Standard Chartered            ---      59.0
State Street Global Markets  -3.0%     60.1
Stone & McCarthy Research     ---      59.0
TD Securities                -3.4%     54.0
University of Maryland       -2.7%     56.0
Wells Fargo & Co.             ---      56.1
Westpac Banking Co.           ---      55.0
Wrightson ICAP                ---      60.0
Zillow                       -3.2%     ---
===========================================

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

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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