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Real Estate Guide 2007
2007 overview
The real estate market was bed-ridden last year but 2007 brings new hope the market will get back on its feet.
2007 Overview
Rising consumer confidence boosts the market


If you're like most Americans, you're more satisfied with your job and economic situation now than you were six months ago. You're also more likely to buy a house, according to analysts who say that rising consumer confidence is painting a rosier picture for the real estate industry in 2007.

"Being secure about your financial future and having confidence is what it really takes to make a commitment on a big-ticket purchase," says Walter Maloney, a spokesman for the National Association of Realtors. "People want to feel good about the future -- about their own personal situation -- before they make that kind of a commitment."

A couple of surveys are designed specifically to measure the amount of confidence consumers have in the economy at any given time. One such survey, the Consumer Confidence Index, which surveys 5,000 households monthly, found that consumers were more satisfied with their economic situations at the beginning of 2007 than they were in 2006.

"We ask consumers to assess both business conditions and employment conditions, which are good barometers of the health of the economy," says Lynn Franco, director of the Consumer Research Center for The Conference Board, which produces the index. "When we look at consumer assessment of the present situation, we see that their assessment is quite strong at the moment and it's stronger than we had seen it in the third quarter of last year."

Another survey, the Reuters/University of Michigan survey of U.S. consumer sentiment, found a similar increase in consumer confidence at the start of 2007.

From happy to house-hunting 
While surveys can scientifically measure consumers' attitudes about the economy, is it a stretch to assume consumers' newfound confidence will lead them to the nearest mortgage lender? The consumer confidence surveys suggest it is not.

"One of the questions in (the Reuters/University of Michigan) survey is, 'Do you think now is a good time or bad time to buy a house?'" says Chris Porter, a senior consultant with Irvine, Calif.-based John Burns Real Estate Consulting. "By the early fall of 2006, this measure had hit its lowest value in about 16 years, but we've seen that pick up in the last several months." 

The Conference Board's survey asks a similar question. "We ask about home intentions and whether or not consumers plan to buy within six months," says Franco. "We've seen that uptick in January as well."

It shouldn't come as a surprise that there's a correlation between economic satisfaction and a robust housing market, Franco says.

"Obviously, if consumers are concerned about the economy, concerned about their earning potential, they're not going to make the long-term investment -- they're going to postpone that type of activity," Franco says. "So as long as the labor market remains strong and confidence remains strong, we should see an improvement in the housing market overall."

Return of good times
So why are so many people whistling to the tune of "Happy Days Are Here Again?" And -- more importantly for those attempting to get a handle on the 2007 real estate market -- will such sentiment last?

"The most significant factor is the labor market," Franco says. "That's the primary source of earnings for consumers, so confidence tends to go as the labor market goes." Other factors that affect consumer confidence include interest rates and prices of commodities such as gasoline, both of which have been favorable to consumers in recent months.

-- Posted: March 8, 2007
 
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