Consumer Confidence and Home Sales Fall - Mortgage Market Woes

by Amy Lillard

This year has been a year of ups and downs for the housing market. In our continuing series, we chronicle news affecting the housing market and its major players.

More disappointing economic news released this week suggests last week's interest rate cut won't be the last.

Consumer confidence fell sharply and unexpectedly in September to its lowest in nearly two years. The index of consumer sentiment released by the Conference Board was 99.8 in September, a sharp drop from 105.6 in August.

"Weaker business conditions combined with a less favorable job market continue to cast a cloud over consumers and heighten their sense of uncertainty and concern," said Lynn Franco, director of the Conference Board's research center, in a statement. "Little economic improvement is expected," she added, "and with the holiday season around the corner, this is not welcome news."

The drop in consumer confidence is attributed to a summer full of worse and worse mortgage industry headlines, growing concerns about jobs, financial market turmoil, and the developing credit crunch.

The drop in consumer confidence came with the news of a slowing home sale market. Reports released Tuesday showed the pace of existing home sales slowed in August.

The National Association of Realtors said U.S. existing home sales, including condominiums, fell a sharp 4.3 percent in August to a 5.5 million-unit annual rate, the slowest since August 2002. Inventories of single-family homes and condos rose 0.4 percent to 4.58 million units, a 10-month supply and the highest since records began in 1999.

The stock market dropped slightly on these new housing and economic reports. They closed mixed on Tuesday.

Analysts are predicting an additional one-quarter point interest rate cut at the Federal Reserve's next policy meeting on October 30-31. An additional interest rate cut could work to alleviate the compounding worries about the economy, jobs and housing markets, worries exacerbated by this new data.