LIVE MARKETS-Consumer confidence plunges, new home sales, home prices tick higher

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CONSUMER CONFIDENCE PLUNGES, NEW HOME SALES, HOME PRICES TICK HIGHER

Data arrived in triplicate on Tuesday, including two housing indicators that were upstaged by an eyebrow-raising slide in consumer confidence.

The mood of the U.S. consumer hit a near four-year low this month, according to the Conference Board (CB).

CB's Consumer Confidence index USCONC=ECI posted a steeper-than-expected 5.4 point drop to 92.9, its fourth consecutive decline and the most dire reading since February 2021.

Digging deeper, survey participants' assessment of present conditions worsened by 2.6%, while near-term expectations plunged 12.8% to 65.2, their most pessimistic level in 12 years and well shy of threshold of 80 below which typically predicts recession.

And while overall attitudes toward the present job market improved nominally, "optimism about future income—which had held up quite strongly in the past few months—largely vanished, suggesting worries about the economy and labor market have started to spread into consumers' assessments of their personal situations," says Stephanie Guichard, CB's senior economist.

Data geeks will remember that the gap between present situation and expectations begins to yawn ever-wider - as seen in the graphic below - it's often a harbinger of the "R" word.

Shifting to the housing market, the sales of newly constructed U.S. homes USHNS=ECI increased by 1.8% in February to 676,000 units at a seasonally adjusted annualized rate (SAAR).

That's just a smidgeon fewer than the 679,000 analysts expected, but follows on the heels of upwardly revised January data.

But some analysts are attributing the uptick to improved weather.

"Mortgage applications remain weak, while leading indicators such as the current sales index of the NAHB survey, and components of the Michigan and Conference Board consumer surveys suggest demand is waning," says Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.

Delving through the Commerce Department's report, the midwest region provided the upside muscle, rising 20.6%, offsetting declines in the Northeast and the West.

At last month's sales pace, it would take 8.9 months to sell every new home on the market, down from 9.0 months in January, and the average sale price of freshly built singe-family homes declined 4.1%.

Speaking of which, average home prices across major U.S. cities rose by 0.5% in January, according to the Case-Shiller 20-city composite USSHPQ=ECI.

It was a reprint of December's increase and a tad hotter than the 0.4% consensus.

Year-on-year, the 20-city composite posted a 4.7% gain, 20 basis points warmer than the December reading but a shade cooler than the 4.8% annual growth analysts expected.

"Rising mortgage rates throughout the year elevated monthly payment burdens, which, combined with already high home prices, pushed affordability to multi-decade lows in many regions," says Nicholas Godec, head of fixed income tradables & commodities at S&P Dow Jones Indices. "The current cycle reinforces the value of real estate as a long-duration asset, but also highlights how sensitive home prices are to changes in financing conditions and buyer affordability."

Among the cities in the composite, New York and Chicago led the year-on-year gainers, rising 7.8% and 7.5%, respectively. Tampa was the sole loser, with home prices down 1.5% compared with a year ago.

(Stephen Culp)

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