By Robert J. Sheehan II. Confidence falters

Consumer confidence fell for the third straight month in August to its lowest level since last November, according to The Conference Board. A sluggish labor market, disarray in the stock market, and corporate accounting scandals continued to affect consumers' view of the economy. Fortunately, the lack of confidence has not curbed remodeling spending.

Existing home sales

A surprising drop of nearly 12% occurred in the sales of existing homes in June, according to the National Association of Realtors. It is difficult to explain why such a drop occurred, because mortgage interest rates are at the lowest levels since the late 1960s and the drop occurred in every region of the country. With no real pent-up demand, sales for the second half of this year should moderate, then move back to higher levels.

Leading economic indicators

Down for the second straight month was The Conference Board's July Index of Economic Indicators. This reinforces the expectation for a limiting of the economic revival over the next several months

Per capita disposable income

A July drop in inflation-adjusted income marked the end of what had been a positive factor in the economy since May 2001. Because federal tax cuts have been fully realized in the economy and can no longer offset a weakened labor market, continued weak growth in personal income could reduce demand for remodeling.

Second mortgage interest rates

Financing terms for remodeling projects are currently very attractive. Second mortgage interest rates dropped another 30 basis points (100 basis points equals 1%) to a record low 5.34% in August. This was the fifth straight month in which the average dropped.