Consumers Grow Wary Amid Housing Woes

Rising Foreclosures And Falling Home Sales Have Shoppers Pinching Their Pennies

(AP)  With Christmas only a month away, American consumers became more pessimistic about the economy in November, sending a widely watched barometer of confidence to the lowest level in two years amid worries about rising fuel costs and a housing market slump.

The New York-based Conference Board said Tuesday that its Consumer Confidence Index dropped to 87.3, marking a four-month slide and continuing down almost 8 points from the revised 95.2 in October.

It was the lowest reading since 85.2 in October 2005 when gas and oil prices soared after hurricanes flooded New Orleans and shut down a large chunk of the nation's oil refineries. It also marked the sharpest drop since September 2005 when the index plummeted 18 points from the previous month. Analysts had expected a reading of 91.5 in November.

A new report prepared for a conference of U.S. mayors by the forecasting and consulting firm Global Insight, warns that major U.S. cities should expect billions of dollars in lost economic activity over the next year. The report predicts that - along with weak residential investment, lower spending and income in the construction industry - curtailed consumer spending because of falling home values will hold back the nation's economic activity.

"The wave of foreclosures that has rippled across the U.S. has already battered some of our largest financial institutions, created ghost towns of once vibrant neighborhoods - and it's not over yet," the report said.

A second report on home prices released Tuesday, offered another sign that the housing slump is far from over. According to S&P/Case-Shiller index, U.S. home prices fell 4.5 percent in the third quarter from a year earlier, the sharpest drop since Standard & Poor's began its nationwide housing index in 1987. The index also showed that prices declined 1.7 percent from the previous three-month period, the largest quarter-to-quarter decrease in the index's history.

The sagging housing market and ongoing wave of home foreclosures aren't the only factors contributing to consumer anxiety.

"Consumers' apprehension about the short-term outlook is being fueled by volatility in financial markets, rising prices at the pump and the likelihood of larger home heating bills this winter," said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement.

The Present Situation Index, which measures how shoppers feel now about the economy, fell to 115.4 from 118.0 in October. The Expectations Index, which measures shoppers' outlook over the next six months, declined to 68.7 from 80.0.

"It doesn't mean that shoppers are not going to spend. It implies they are going to be cautious," this holiday season, said Joel L. Naroff, president and chief economist at Naroff Economic Advisors Inc. "To me, it will be a mediocre season, not a terrible one, but not a good one either."

Wall Street paid little attention to the consumer confidence report, rebounding modestly Tuesday after the Abu Dhabi Investment Authority said it will invest $7.5 billion in Citigroup Inc. - a vote of confidence for the nation's largest bank, which has struggled with heavy losses amid the ongoing mortgage crisis.

The Dow Jones Industrials rose 182.16, or 1.43 percent, to 12,925.60 in Tuesday afternoon trading.

For retailers, the downbeat report on consumer confidence further fueled concern that the holiday shopping season will be weak. Retailers struggled with disappointing sales this past fall, and while many retailers were encouraged by better-than-expected turnout for the official start of the holiday shopping season, it was the fat discounts that lured consumers in.

According to the International Council of Shopping Centers-UBS index, same-store sales rose 2.5 percent for the week ended Saturday, compared to the year-ago period. Same-store sales are sales at stores opened at least a year and are considered a key indicator of a retailer's health. According to Michael P. Niemira, chief economist at ICSC, "customer traffic was reasonably healthy but consumers were out looking for bargains."

The nation's retailer will provide a more complete picture of how the Thanksgiving weekend fared when they report same-store sales for November on Dec. 6.

The big worry is that shoppers will take their time returning to the stores this holiday season amid worries about higher gas, an escalating credit crisis and the slumping housing market.

One bright spot has been the labor market, which has held steady. Earlier this month, the Labor Department reported that the nation's payrolls grew by a net 166,000 in October, the most in five months. The unemployment rate remained at 4.7 percent.

The consumer confidence report - derived from 5,000 responses through Nov. 19 - showed that shoppers' outlook for the labor market was more pessimistic, however. The percent of consumers expecting more jobs in the months ahead fell to 10.8 percent from 13.3 percent, while those anticipating fewer jobs rose to 23.1 percent from 20.2 percent. The proportion of consumers expecting their incomes to decrease in the months ahead rose to 11.0 percent from 9.1 percent.

[investnj]

I think consumers should also clearly understand that approximately 3% of the economy each year is driven by borrowed money to close the gap between taxes and government spending.

This is a hidden cost that needs to be included on our personal ''balance sheets'' in evaluating consumer financial strength. Even if you think you''re ''balancing your budget'', my 3-member family is about $45,000 deeper in debt due to Republican policy of unfunded tax cuts. This definitely factors in to my consumer confidence; don''t be fooled into thinking the tax cut on April 15 came without a terrible price on our future growth and stability.

[investnj]

I think consumers should also clearly understand that approximately 3% of the economy each year is driven by borrowed money to close the gap between taxes and government spending.

This is a hidden cost that needs to be included on our personal ''balance sheets'' in evaluating consumer financial strength. Even if you think you''re ''balancing your budget'', my 3-member family is about $45,000 deeper in debt due to Republican policy of unfunded tax cuts. This definitely factors in to my consumer confidence; don''t be fooled into thinking the tax cut on April 15 came without a terrible price on our future growth and stability.

[ov442]

I meant to include the overall economy along with the housing market in the below comments.

[ov442]

Hey look the news media reports on whats going on. Thats a news article. Some media individuals at every media organization write editorials which are opinions about whats going on. I think some people tend to mix those up and not discern a difference.

The Medias JOB is to tell the people whats going on, but not to make sure everyone knows everything. Its your choice as a consumer to go read whats going on and its your choice if you dont want to.

If things are going badly in the housing market, i for one want to know exactly whats going on with frequent updates.
I dont like whats going on either but im not dumb enough to blame the media for reporting it.

"wow, if the media would just stop telling us whats happening, and keep it a secret maybe they could fool us all into being ignorant mindless morons that have no basis for how to plan, what to do, what to buy, when to buy, etc. - that would be great"

[rudy654-2009]

Posted by ubrew12 at 11:48 PM

I think you went too fast in attributing that comment to me. I certainly didn''t say it. But I sure was commenting about it.

[ubrew12]

rudy654 said: "Why don''t you people get some pen pals in Africa, Indonesia, or most of the third world countries and commiserate with them. "

So now we should be proud that we aren''t quite as bad as Africa. That''s neocon comfort for ya, folks!!! Put a stiff upper lip on it and pass the fermented coconut milk!

[rudy654-2009]

I stand by what I said. I am not a lad. My name is Robin and I am 52 years old.
Posted by rohink at 07:06 PM

So what? I don''t have to have your permission to complain if I want to, nor does anyone else. I have lived in Third World countries and I most certainly know what it''s like. So, I don''t need you to tell me how bad it has to really be before I can complain.

[hypnotoad72]

If you media minds(mindless)would quit talking doom & gloom, maybe the confidence of the American People would return. I think you thrive on making things worse. Get a life and quit messing with ours.

Posted by sandrap4
--------------------

Best response ever. Plus, living life is learning to let go of fear. Something many of us, myself definitely included, ought to remember...

[ontheleft]

The media does not cause recessions. In fact, the economy has been showing warning signs for a while. When the mainstream media starts talking about a recession, they are usually late with the news.

[feelfree1]

Related:

"(Bloomberg) -- Citigroup Inc., the biggest US bank, is paying a `junk bond'' rate to uphold Chairman Robert Rubin''s pledge to preserve the company''s dividend and weather this year''s mortgage-market decline."

Citibank customers now also owe part of their arses to Abu Dhabi.

Good thinking.

[sandrap4]

If you media minds(mindless)would quit talking doom & gloom, maybe the confidence of the American People would return. I think you thrive on making things worse. Get a life and quit messing with ours.

[rohink-2009]

Posted by rudy654

I stand by what I said. I am not a lad. My name is Robin and I am 52 years old.

[rohink-2009]

Thank you Hypnotoad for clarifying things for me. I didn''t realize I was having so much fun. Actually, I don''t find it fun. I felt compeled to respond to an article. I am grateful for all I have and really do fear for this Country. And, this has nothing to do with Democrats or Republicans. Politicians are corrupt. Both parties are in the pockets of big business.

[rudy654-2009]

Why don''''t you people get some pen pals in Africa, Indonesia, or most of the third world countries and commiserate with them. Oh wait, they don''''t have computers, enough food to eat, a descent home to live in or even electricty. You fools have way to much time on your hands. Stop feeling so sorry for yourselves and do something constructive with your lives. Count your blessings. Does anyone know what gratitude is? Posted by rohink at 06:37 PM

So, unless everybody is living in a mud hut, waiting for their next drink of water...it''s shut up, you got it good, spoiled rotten brats! Such a lovely lad, you are. I should tell you to check out how big oil has literally run people into poverty in Nigeria, but you probably already knew that, smart lad that you are!

[rudy654-2009]

Let me guess, you do your taxes by yourself. LOL...LOL again. When EVERY tax bracket rate decreases, exemptions and standard deductions increase and tax credits are available to all Americans, your taxes went up? LOL...LOL again.
Posted by mbcsmith at 04:48 PM

LOL! Nope, I get my taxes done! I pay to get them done. And yes, my taxes have gone up! But I bet you don''t know why. You think you do, but you don''t. AND I do know why!! It makes me laugh, because I told my tax preparer the same thing after I got that stupid, bogus $300 tax return the first year Bush was President. Yeah, I bought it hook, line, and sinker. Thought taxes really went down! The whole ten yards. Then, it came time to pay. AND did I pay! I was shocked. Then my tax preparer checked and sure enough my taxes went up. And the next year they went up again. And so on. So, since I am a waste of public education (another Limbotism), I guess I''ll let you try and figure out why. But I really think you are the waste of public education, and can''t figure it out. Have fun, you Limbot, you!

[hypnotoad72]

rohink - talking about the people who voted for the Democrats last year, I see...

For someone so mature, you''re having way too much fun by wasting all your handy free time too. ;-) (Gee, everybody knows a whiner when they see ''em...)

And you''re right, like you we all should count our blessings and be more "productive". Unfortunately, with offshoring and the cost of necessities, more and more Americans are losing the ability to be productive (and don''t want to litter the world by being reproductive), to buy the goods we''d otherwise make on our own?

Uh-oh.

[rohink-2009]

Life really is simple. Humans like to complicate things. Be grateful, do good, stop complaining. Be constructive members of society instead of pointing fingers and blaming. We are a spoiled society and have been for a long time. Long before Bush ever got into office and will be for a long time to come. Does anyone know what true povery, abuse and torture are anymore. What a bunch a sissy wimps we are raising.

[rohink-2009]

Posted by hypnotoad72

I''ve lived for 52 years and I think I know a little bit about history. I know ungrateful, complaining people when I see them too.

[rohink-2009]

Why don''t you people get some pen pals in Africa, Indonesia, or most of the third world countries and commiserate with them. Oh wait, they don''t have computers, enough food to eat, a descent home to live in or even electricty. You fools have way to much time on your hands. Stop feeling so sorry for yourselves and do something constructive with your lives. Count your blessings. Does anyone know what gratitude is?

[hypnotoad72]

rohink - look at human history. You''ll find that while your comment has some validity, real life is far less simplistic than what you want it to be.