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
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
"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.