According to Mortgage Industry News, the consumer confidence index dropped to 95.6, its lowest reading since October 2005. The decline was much steeper than forecast: analysts expected consumer confidence to drop to 99 from 99.8 in September. With all the scary headlines, high inflation, and foreclosures in nearly every neighborhood, who wouldn't be worried?
Another report shows home prices dropped 4.4% year-over-year in August, the biggest monthly decline since 2001 when the index was established. Homeownership declined further in the third quarter, to 68.1% from 68.3% the previous quarter, compared to a peak of 69.3% in 2004. And even more foreclosures may be coming as adjustable mortgages reset.
In short, the housing market is not doing well at all, and this to a backdrop of rising oil and food prices, a weak dollar and increasing job market instability, which results in low consumer confidence. Low confidence often means low consumption which may trigger further job losses, and so on. This looks a lot like a vicious circle, and those are pretty hard to deal with.