By Bob Willis Dec. 29 (Bloomberg) -- The decrease in U.S. home prices probably eased further and consumer confidence climbed, showing the biggest part of the economy is recovering heading into 2010, economists said before reports today. Property values in 20 metropolitan areas probably fell 7.2 percent in October from a year earlier, the smallest 12-month drop since 2007, according to the median forecast of 31 economists surveyed by Bloomberg News. Sentiment improved in December for a second month, another report may show. The drop in property values, mortgage rates less than a percentage point from record lows, rising incomes and government credits are making homes more affordable and may help the market keep improving. Households, whose spending accounts for 70 percent of the economy, are also turning less pessimistic as firings slow and stock prices rebound. “The economy is increasingly showing signs of stabilizing,” said John Herrmann, chief economist at Herrmann Forecasting in Summit, New Jersey. “Consumer net worth is strengthening from an improving equity market and what is likely the bottoming in home prices. Spending patterns and income flows are improving.” The S&P/Case-Shiller home-price figures are due at 9 a.m. New York time. Estimates ranged from declines of 4.6 percent to 8 percent. The 20-city index, unadjusted for seasonal changes, has been rising on a month-to-month basis since May, the first gains since the measure started dropping in August 2006. Confidence Improves The New York-based Conference Board’s consumer confidence index, due out at 10:00 a.m., may rise to 53 this month from 49.5 in November, according to the survey median. The measure reached a record-low 25.3 in February and averaged 97.1 during the six-year economic expansion that ended in December 2007. A drop last month in the unemployment rate, rising incomes and holiday bargains probably gave sentiment a boost, economists said. Best Buy Co. offered some DVDs for half off and Jos. A. Bank Clothiers Inc., a men’s clothing chain, deepened discounts to at least 50 percent. Merchants were trying to draw procrastinators and shoppers delayed by the East Coast storms. To help ensure housing doesn’t weaken again, President Barack Obama and Congress last month extended a tax credit for first-time homebuyers until April 30 from Nov. 30, and expanded it to include some current owners. More Sales Existing home sales in November rose to a 6.54 million annual rate, the highest level since February 2007, the National Association of Realtors said last week. “The tax credit had the intended impact of drawing buyers in and lowering inventory,” Lawrence Yun, the real-estate agents group’s chief economist, said in a news conference. “An estimated 2 million buyers have taken advantage of the credit.” The Standard & Poor’s Homebuilding Supercomposite Index is up 20 percent since the end of June as the housing outlook brightened. Mounting foreclosures and an unemployment rate that economists surveyed by Bloomberg News this month forecast will exceed 10 percent in the first half of 2010 remain risks for the housing market and the economy. Foreclosure filings in 2009 will reach a record for the second consecutive year with 3.9 million notices sent to homeowners in default, RealtyTrac Inc., the Irvine, California- based company said Dec. 10. This year’s filings will surpass 2008’s total of 3.2 million. Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, said Dec. 16 its fourth-quarter loss narrowed as more buyers signed purchase contracts. “On the whole, we are seeing more price stability across our markets,” Chief Financial Officer Larry Sorsby said in a Dec. 17 conference call.

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