(USA Today) - Home prices in most U.S. cities are increasing more slowly than earlier in the year, and consumer confidence is rising, in dual signs that expectations of a stronger economy in 2014 are taking root.
The Conference Board's Consumer Confidence Index rose 6.1 points in December, to 78,1, recouping almost all of the drop it sustained during the October government shutdown, the board reported on Tuesday. Economists had expected the index to rise to 76.8, according to a survey by Econoday. The biggest change was more optimism about the economy's path over the next six months, which rose more strongly than perceptions of the current state of the economy, the board said.
Separately, the Standard & Poor's/Case-Shiller 20-city home price index rose 0.2% from September to October.Monthly price gains slowed in 18 of the 20 cities tracked by the index, Prices have risen 13.6% over the past 12 months, the fastest since Feb. 2006, S&P-Dow Jones Indices said. The S&P/Case-Shiller index isn't adjusted for seasonal variations, so the change partly reflects slower buying in the fall.
"This is pretty good news -- we're getting back toward the progress we had made in confidence in the spring and summer that was derailed by the government shutdown,'' said Lynn Franco, director of economic indicators at the Conference Board ."It's still a somewhat cautious consumer. But looking at big ticket items like cars and houses, there's a willingness to spend developing."
The weak spot in the consumer survey was that consumers have a relatively dim view of their ability to get pay increases, but even those results were stronger in December than in recent surveys, Franco said.
The Conference Board index is designed to compare confidence over time. A reading of 100 would mean that confidence was as high as it was in 1985, a year when the economy grew 4.2%, about twice the 2013 pace.
Even the housing news was a sign of a strengthening economy, Quicken Loans vice president Bill Banfield said.
"The New Year will bring (monthly and annual price gains) closer together, as the yearly home price report begins to make more modest, sustainable increases that we find in a healthier economy,'' Banfield said.
Price increases are moderating because the wave of foreclosed properties that sold cheaply in 2010 through early 2012 has largely crested, Sterne Agee economist Lindsey Piegza said. Conditions now may lead to a stronger push in new home construction next year, Barclays economist Cooper Hawes said.
