U.S. Home Sales Hit High; Consumer Confidence Plummets

ByJohn S. McClenahen Could it be that American consumers otherwise discouraged by a lackluster economy are trying to find some comfort in a new home? That possibility emerges from data just released by the Chicago-based National Association of Realtors (NAR) and the New York-based Conference Board, a business-funded research group. Sales of existing single-family homes rose to a new monthly record of 6.09 million units in January, says NAR. Last month's seasonally adjusted annual rate was 3% higher than December 2002's revised figure of 5.91 million and 2.2% above the previous record high of 5.96 million in January 2002. "Given the demands of a growing population, and with real estate becoming the safe haven for investment, many factors are in place for a continuation of strong home sales," says David Lereah, NAR's chief economist. Meanwhile, consumers are really down in the basement over the U.S. economy. This month, for the third consecutive month, the Conference Board's consumer confidence index has fallen, with February's figure near a 10-year low. The index now stands at 64.0 (1985=100), down nearly 15 points from January's 78.8. February's drop was far greater than the four-point decline that economists generally expected. The last time the index was lower was in October 1993 when it reached 60.5. "Lackluster job and financial markets, rising fuel costs and the increasing threat of war and terrorism appear to have taken a toll on consumers," says Lynn Franco, director of the Conference Board's research center. "This month's confidence readings paint a gloomy picture of current economic conditions, with no apparent rebound on the short-term horizon." Indeed, consumers anticipating that business conditions will worsen during the next six months rose to 19% in February from 14% in January while those expecting an improvement fell to 15.3% from 17.7%.