The New York-based Conference Board's index of consumer confidence fell to 103.9 in June from a revised 108.5 the prior month. Purchases of new homes fell 1.6 percent last month to an annual pace of 915,000, the Commerce Department reported in Washington, and housing prices in 20 cities in April fell by the most in at least six years, according to S&P/Case-Shiller.
Dwindling property values may further erode the confidence of shoppers, whose spending kept the economy afloat for the past year. While the Federal Reserve -- which begins a two-day meeting tomorrow that is likely to keep interest rates unchanged -- projects that economic growth will pick up in coming months, further such declines may call that into question.
``There are some pretty significant negative risks for economic growth,'' said Carl Riccadonna, an economist at Deutsche Bank Securities Inc. in New York. ``We are not at the bottom yet in housing. One of the biggest questions is how much longer can the consumer hang on, given the strong headwinds.''
Stocks surrendered gains after the reports before rebounding, while Treasury notes fell. The yield on the benchmark 10-year bond was 5.011 percent at 12:02 p.m. in New York.
The Conference Board's index was forecast to fall to 105, according to the median estimate in a Bloomberg survey of 69 economists, from an originally reported 108.
More Americans said jobs were getting harder to find, the survey showed, while gasoline prices have held near $3 a gallon after reaching an all-time high last month.
The share of consumers who said jobs are plentiful declined to 27 percent, the lowest since November, from 29.1 percent. The proportion who said jobs are hard to get rose to 21.1 percent from 19.7 percent.
The Conference Board's measure of present conditions fell to 127.9 from 136.1. The gauge of expectations for the next six months declined to 87.9 from 90.1.
``The housing market will be a damper on the consumer,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. ``Mortgage equity withdrawal won't be a contributor to consumer spending.''
A jump in mortgage rates this month and a glut of unsold properties on the market will continue to discourage home construction, economists said. The housing slump, already the worst since 1991, will restrain the economy for the rest of the year and potentially into next.
``The housing market is in a contractionary phase and we don't expect that to end anytime soon,'' said Julia Coronado, a senior economist at Barclays Capital Inc. in New York. ``We won't see another huge decline, housing will just sort of glide down.''
Economists forecast new home sales would decline to a 924,000 annual pace from an originally reported 981,000 rate the prior month, according to the median estimate in a Bloomberg survey of 72 economists.
Home values in the U.S. declined 2.1 percent in April from the same month a year earlier, according to a report today by S&P/Case-Shiller. It was the fourth straight drop in the group's index, which started in 2001.
The confidence survey showed 16.4 percent of Americans think overall business conditions are deteriorating, up from 14.6 percent last month.
A survey by Reuters/University of Michigan released earlier this month showed sentiment also fell more than forecast in June. While the University of Michigan and Conference Board surveys generally track each other, the Conference Board's focuses more on labor market conditions.
More Americans filed first-time claims for unemployment benefits in the week ended June 16, suggesting the labor market may be starting to cool. While unemployment is at 4.5 percent, the second-lowest in six years, economists forecast the jobless rate to creep higher in coming months.