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U.S. consumer mood darkens, home price growth stalls

A family is served drinks at a restaurant in New York September 17, 2012. REUTERS/Andrew Burton

By Richard Leong and Chuck Mikolajczak

NEW YORK (Reuters) - U.S. consumer confidence suffered its biggest blow in four years in July on a less upbeat jobs outlook, while home appreciation in major cities stalled in May, suggesting a spring pause in housing demand.

The disappointing data comes as Federal Reserve policymakers meet to consider whether the U.S. economy is strong enough to warrant an end to the Fed's near zero interest rate policy, perhaps as soon as September.

The Federal Open Market Committee, the U.S. central bank's policy-setting group, is meeting on Tuesday and Wednesday.

The Conference Board, an industry group, said on Tuesday its index of consumer attitudes fell to 90.9 this month from a downwardly revised 99.8 in June. It fell far short of a forecast reading of 100.0.

The latest figure was the lowest since September 2014, while the decline was the steepest since August 2011. The report's jobs hard-to-get index rose to 26.7 from June's upwardly adjusted 26.1.

Ryan Sweet, senior economist at Moody's Analytics in West Chester, Pennsylvania, said the slump in confidence likely reflected recent upheavals in the global economy.

"This seems to be an aberration," he said. "Consumers were probably freaked out by the problems in Greece and the Chinese stock market, and the volatility on Wall Street."

Wall Street stock prices and the dollar rose after briefly paring gains on the disappointing consumer confidence data. U.S. Treasuries prices fell on renewed appetite for stocks. [.N] [FRX/] [US/]


Other data on Tuesday showed the acceleration in home prices lost steam in the spring, but there were encouraging signs for first-time buyers.

The S&P/Case Shiller composite home price index of 20 metropolitan areas in May rose 4.9 percent year over year, matching the pace in April. Economists polled by Reuters had projected a stronger 5.6 percent increase.

Rising home values have bolstered homeowners' balance sheets, but higher house prices and lackluster wage gains have made it difficult for many people to buy a home. The U.S. home ownership rate dropped to 63.5 percent in the second quarter on a seasonally adjusted basis, the lowest level since the series began in 1980, Commerce Department data showed.

Increasing household formation and an improving labor market, however, are expected to pull more first-time buyers into the market. On Tuesday, No. 1 U.S. homebuilder D.R. Horton, which mainly caters to first-time buyers, said its quarterly profit almost doubled from a year ago as orders jumped.

Analysts said indicators showing improvement in the housing and job sectors would allow the FOMC to consider normalizing interest rate from the emergency low level it adopted in December 2008 during the global financial crisis.

"As long as the general tone of the data shows improvement and inflation is moving toward its 2 percent target, they will feel comfortable to raise rates in September," Moody's Sweet said.

(Additional reporting by Chuck Mikolajczak in New York and; Lucia Mutikani in Washington; Editing by Meredith Mazzilli and Andrea Ricci)