U.S. Consumers Concerned About Falling Home Prices

By Ruth Mantell, MarketWatch

RISMEDIA, Oct. 2, 2007-(MarketWatch)-Consumers have become increasingly concerned about falling home prices over the past several months, according to a consumer-sentiment survey released last week.

Home prices were judged less favorably in September than at any other time during nearly two decades, including the housing slump of the early 1990s, said Richard Curtin, director of the Reuters/University of Michigan Surveys of Consumers.

One in five homeowners reported that they expect their home’s market value to decline during the year, while one in four think their home’s market value has already recently declined, according to the survey.

What’s more, households with higher incomes voiced relatively greater concerns about falling home values, the latest survey indicated.

Joshua Shapiro, chief U.S. economist with MFR Inc., cited ebbing wage and salary growth, in addition to the housing sector’s ills, as having an increasingly negative effect on growth in consumer spending.

“High food and energy prices don’t help either,” he said.

These high food and fuel prices remained a top concern in September, especially in families with lower incomes, according to the survey.

Consumers are expected to become “more cautious spenders” in the year ahead, although such concerns are not seen as sparking an economy-wide recession, Curtin said.
Family budgets ‘devastated’

“When asked to explain in their own words how their financial situation had recently changed, one-third of households with incomes below $50,000 said that higher prices had already devastated their family’s budget, and half of these families expected prices to increase faster than their incomes during the year ahead, reducing their living standards even more,” Curtin said in a statement.

As worries about the slumping housing market rose, consumer sentiment weakened slightly in late September, to a reading of 83.4 from 83.8 earlier in the month.
Economists had been expecting the index to rise to 84.0. The index now matches the level in August.

The data reinforced what the Conference Board had reported on Tuesday — namely, that U.S. consumer confidence declined to its lowest level in nearly two years in September amid a weaker job market and uncertainty about business conditions.

Also Friday, the Commerce Department reported that U.S. real consumer spending increased 0.6% in August, the fastest growth in two years.

In addition, the Commerce Department said that spending on nonresidential construction projects jumped 2.3% in August, offsetting spending on housing that declined for the 18th straight month.

Ruth Mantell is a MarketWatch reporter based in Washington.

Real Estate Hot Topics

Profit Center: Real Estate Tips, Training & Events

RISMedia Solutions

RISMedia on the Go

Today's Featured Listing