Posted by: realtormarkpalace | September 6, 2010

Real Estate Outlook: Consumer Confidence

Real Estate Outlook: Consumer Confidence
by Kenneth R. Harney
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After a few weeks in August where the economic and housing outlooks have been a little sobering – even grim – the numbers at the beginning of September are looking increasingly positive.

Take consumer confidence. We all know how important that is for economic activity and future housing sales. Well, the latest survey from the University of Michigan came in with a one point jump in overall confidence, after months of declines.

That may sound modest, and it is, but after so many bad headlines about the economy, it’s a step in the right direction.

And indeed, the latest Commerce Department study finds that consumer spending is on the upswing, and just registered the biggest pickup in four months.

Meanwhile, there was surprisingly strong news from the industrial manufacturing front, which is a key factor for future employment growth: The Institute for Supply Management reported a one point gain in its manufacturing index for the latest month – which was enough of a shock to doom-and-gloom analysts on Wall Street that the stock market soared on the news.

On the housing front there were even more encouraging numbers:

  1. Pending home sales , which had been sliding since the phase-out of the tax credits last spring, rose by 5.2 percent, according to the National Association of Realtors.

  2. Also, the Standard and Poor’s /Case-Shiller index reported that home prices in the top 20 metropolitan areas gained 4.2 percent year over year. Prices were up in 15 of the 20, including some big gains in California and elsewhere.

San Francisco prices rose by 14 percent for the year, San Diego by 11 percent. Minneapolis prices jumped 11 percent and Washington DC houses were up by 7 percent.

Gains like these clearly caught some analysts off-guard. A Bloomberg poll of economists before the Case Shiller numbers were released had forecast a more modest 3.5 percent increase.

Meanwhile Freddie Mac came up with roughly similar results. Its latest home value index measured a 3.1 percent average gain from the first quarter of this year through the second quarter ending June 30.

Though Freddie Mac said the increases can be partially explained by the housing tax credit program, historically low mortgage rates clearly are also playing a role.

As long as rates stay in the mid four percent range — and Federal Reserve chairman says he’s committed to keeping them low — housing should increasingly look attractive to first-time and move up buyers, who find they can now afford much more house than they might have imagined.

Published: September 6, 2010

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