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The Latest or ig i nat ion ANALYTICS Not So Fast Consumer confidence deteriorated considerably as the federal government shutdown and debtceiling crisis took a particularly large toll on consumers' expectations. Affordability drops with declining incomes as mortgage rates climb. S e c on da r y M a r k e t a na ly t ic s se r v ic i ng O Consumer Confidence Staggered in Q3 Government shutdown left a lasting impression on American consumers still wary of the sustainability of the recovery. C onsumer confidence experienced a sharp decline in October, reflecting the impact that the month's government shutdown had on Americans. The Conference Board's Consumer Confidence Index, conducted for the group by Nielsen, fell to 71.2 in October after a moderate decline to 80.2 in September. The benchmark value for the index is 100, set in 1985. "Consumer confidence deteriorated considerably as the federal government shutdown and debt-ceiling crisis took a particularly large toll on consumers' expectations. Similar declines in confidence were experienced during the payroll tax hike earlier this year, the fiscal cliff discussions in late 2012, and the government 50 | The M Report shutdown in 1995/1996," said Lynn Franco, director of economic indicators for the Conference Board. "However, given the temporary nature of the current situation, confidence is likely to remain volatile for the next several months." The Present Situation Index, a measure of consumer perceptions about current economic conditions, declined moderately to 70.7 from 73.5 in September. Those claiming business conditions are "good" decreased to 19 percent from 20.7 percent, while those claiming conditions are "bad" edged down slightly to 23 percent from 23.9 percent. Respondents' appraisal of the job market was similarly less favorable. The number of those saying jobs are "plentiful" was down just slightly to 11.3 percent, while those saying jobs are "hard to get" increased more than 2 percentage points to 35.8 percent. Meanwhile, consumer expectations, which had softened in September, fell significantly in October, with the Expectations Index plunging from 84.7 to 71.5. Those expecting business conditions to improve over the next six months fell more than 4 percentage points to 16 percent, while those expecting conditions to worsen increased to 17.5 percent— a gain of 7.2 percentage points. Again, the outlook for labor was also more pessimistic. The number of respondents anticipating more jobs in the coming months fell to 15.3 percent, while those expecting few jobs increased to 22.7 percent. Asked about their income, 15.8 percent of consumers said they expect an increase in the near future—up from 15.1 percent. However, the number of respondents expecting a decrease rose to 15.4 percent from 13.9 percent. ver the past year, home prices have risen 16 percent and mortgage rates have climbed from 3.7 percent to 4.43 percent, all while incomes have risen by just 3 percent, according to Chicagobased Interest.com, which is owned by Bankrate.com. These diverging trends have led to a decline in affordability across the nation. "The simple fact is that the very small improvement Americans have seen in their paychecks hasn't kept pace with a jump in home prices and mortgage rates," said Mike Sante, managing editor of Interest.com. In all 25 of the nation's largest metropolitan areas, it is more difficult to afford a home this year than last year, according to Interest.com. In fact, in 17 of the 25 markets, a median income is not enough to purchase a median-priced home. Last year, this held true in only six markets, according to Interest.com. The least affordable market is San Francisco, California, where the median income is 47.93 percent below what would be necessary to purchase a median-priced home. Three of the five least affordable markets are located in California. San Diego is the second-least affordable market, where median income would need to rise 37.71 percent to afford a median-priced home. Los Angeles comes in as the fourth-least affordable market, where median income would need to rise 30.13 percent. The list is rounded out by New York in third place and Miami in fifth place. The most affordable market is Atlanta, where the median income exceeds 24.92 percent of what is necessary to purchase a median-priced home. Other markets in the top five list of most affordable markets include Minneapolis, Minnesota (23.86 percent); St. Louis, Missouri (17.94 percent); Detroit, Michigan (16.87 percent); and Pittsburgh, Pennsylvania (11.33 percent).

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