Transcripts

Consumer Confidence Climbs

SUSIE GHARIB: New economic reports today showed surprising strength in consumer spending and the housing market. That weighed down stocks, as investors became concerned that the Federal Reserve will not cut interest rates early on in the New Year. The Conference Board said today its consumer confidence index rose much higher than expected to 109 in December. That's up almost four points from November's reading and the highest level since April. The numbers are based on a survey of 5,000 U.S. households and they're closely watched because consumer confidence often predicts spending trends.

Meanwhile, sales of existing homes also rose more than economists had expected, up 0.6 percent in November. That follows a half a percentage increase in October and marks the first back-to-back monthly sales gains in almost two years. But while sales are going up, prices are coming down. The numbers from the National Association of Realtors also showed the median price for an existing home fell to $218,000 last month. That's down more than 3 percent from the same month a year ago. Economist Beth Ann Bovino of Standard & Poor's says that trend to lower prices should help boost existing home sales next year.

BETH ANN BOVINO, SENIOR ECONOMIST, STANDARD & POOR'S: What we think will be driving the increase in home sales is going to be lower prices. Homeowners are going to have to capitulate in what they expect their homes are worth, lower it somewhat, and that will actually drive the home sales through.

GHARIB: Bovino says she believes that the worst of the housing slump is over. But she says the housing market will not rebound until inventories of unsold homes fall sharply.