The Conference Board Consumer Confidence Index was released this morning (see this post), as were the Case-Shiller monthly Home Price Indices. Here is a chart of both data series, which have exhibited a strong correlation since 2007.

Click for a larger image

House prices began the cliff dive a few months before consumer confidence, which in part is attributable to the stubborn belief that housing prices would always rise. Of course there were other reinforcing factors, not least of which was the market correction that began in October 2007 and turned into a crash the following year. Unemployment has also been a key part of this nasty mix, as I pointed out last October: Consumer Confidence, the Stock Market and Unemployment.

Friday's Advance Q4 GDP report is generally expected show improvement over the Q3 2.6%. But the continuing decline in house prices, prolonged high unemployment and a bleak consumer outlook could impact GDP in 2011. For more on Q4 GDP forecasts, see my Anticipating the Advance Estimate for Q4 GDP.