U.S consumer confidence reaches 18-year high

U.S. consumer confidence shot up to an 18-year high in September—good news for retailers as the holiday shopping season approaches.

The Conference Board, a business research organization, said Tuesday that its consumer confidence index climbed to 138.4 in September from 134.7 in August. This month’s reading was the highest since September 2000.

The index measures consumers’ assessment of current economic conditions and their outlook for the next six months. Both improved in September.

“These historically high confidence levels should continue to support healthy consumer spending and should be welcome news for retailers as they begin gearing up for the holiday season,” said Lynn Franco, the Conference Board’s director of economic indicators.

The U.S. economy grew at an annual pace of 4.2% from April through July, the fastest rate in nearly four years. And the unemployment is 3.9%, near a 50-year low.

The strong job market impressed Americans responding to the Conference Board survey: 45.7% said jobs were “plentiful”—most since January 2001.

“Knowing that the job market is strong, knowing that one has a regular paycheque, does wonders for confidence,” said Jennifer Lee, senior economist at BMO Capital Markets.

Pace of rise in U.S. home prices slows down in July

U.S. home prices rose in July at the slowest pace in 10 months as climbing mortgage rates become a more significant factor for a growing number of prospective buyers.

The S&P CoreLogic Case-Shiller 20-city home price index increased 5.9% in July compared with a year earlier, down from a 6.4% annual gain the previous month.

Home prices are rising at twice the rate of wages, which has likely contributed to a cooling in the market this year. Sales of existing homes have dropped 1.5% in the past 12 months. Mortgage rates last week reached their highest level since May.

“Coupled with mortgage rate increases, higher prices are stifling home sales as more buyers are priced out of the market,” Danielle Hale, chief economist at Realtor.com, said Tuesday after the report was released.

The combination of rising home prices and higher mortgage rates has made homes less affordable, even as a strong job market and some signs of higher pay have lifted demand.

The average 30-year mortgage rate rose to 4.65% last week, according to mortgage giant Freddie Mac. That is up from 3.83% a year ago.

Any rate below 5% is very low by historical standards, but many homeowners locked in rates below 4% in the past five years. That means they would have to accept a higher rate to buy a new home. Plenty of homeowners are choosing to remodel their current homes instead.

The number of homes for sale remains limited, which has sparked bidding wars in many cities. However, the supply crunch may be easing: There were 1.92 million homes for sale at the end of August, up from just 1.87 million a year ago.