The Bad News About Increased Consumer Confidence

By
Real Estate Broker/Owner

According to an article by Reuters, "The Reuters/University of Michigan Surveys of Consumers said its final index of confidence climbed to 65.1 in April from 57.3 in March. That was the highest since September 2008 and the biggest one-month increase since October 2006."  This is certainly good news as an economic recovery without the confidence of the consumer is not viable.

Part of this increased consumer confidence may be attributed to the fact that the stock market, which is no longer an economic indicator, has had a great month.

However, what is concerning is that housing activity, specifically mortgage purchase applications, have remained anemic during the month of April despite this surge in consumer confidence.

I have made the argument before, until the housing market gets price stability, the economy and banking system will experience significant headwinds.  In other words, its the housing market, stupid.  And in order for the housing market to get price stability we need to see a meaningful increase in demand so that we can get the excess inventory absorbed.  Unfortunately, based on the mortgage purchase application index, we can expect to see continued depressed demand for real estate over the next couple of months.

Consumer confidence is fine, but it needs to translate into action and so far, in terms of real estate, broadly speaking, we are not seeing it. 

Comments (1)

TIM MONCRIEF
Tim Monciref - Austin, TX
Over 2,000 homes sold…..

Consumer confidence can translate into real activity.  Without it real activity will not likely be a reality and we would like see the double dip.  When the real market comes to play in the real estate world this summer, we will know.  I am just waiting for one good job report.......  There is this iceberg in front of us.......I think we can get around it so says the captain of the Titanic....and so he did; but he did not see that the iceberg widened beneath the waters where one can not see its true reality.

May 01, 2009 05:17 AM