coto4sale.com » Consumer Confidence

Is This Market ‘Bottom’ a True One That Will Stick?

Bob Phillips — Fri, 11 May 2012 15:06:08 +0000

From Friday’s DSNews.com, written by Esther Cho:

“During a CoreLogic economic webinar Thursday, the company’s chief economist, Mark Fleming, Ph.D., was asked if the housing market has hit bottom and will it stick, as reports seem to be speculating.

Apparently, the market in recent years was thought to have hit bottom twice before.

Fleming noted that this happened in 2010 when prices peaked and year-over-year growth rate was positive. This was also a time when the home buyer tax credit was available. House prices stabilized, but the problem with that, Fleming explained, is that when the tax credit expired, demand disappeared and prices continued to fall again.

We again saw some stabilization in the beginning of 2011, Fleming said, but the economy fell off the rail with the European debt crises, the Japanese earthquakes, and our own debt ceiling debate.

Then, Fleming said, consumer confidence crashed, everyone stopped wanting to buy, demand went down, and prices declined again.

As for whether or not this time it truly is bottom, that partly depends on unpredictable events.

“The longer we go now without any major shock, the more strength this recovery will have and the more it will be able to sustain without significant detrimental impact any shocks that might come,” Fleming said. “So time then is one of our most helpful forces at the moment.”

While uncertainty seems to surround whether or not the market has truly hit bottom, one trend does appear to be more stable.

With recent reports of declining delinquencies, Fleming said he expects to continue to see fewer delinquencies and foreclosure starts in coming years. This is partly due to the performance of loans originated between 2009 and 2011, which Fleming explained are benefiting from tighter underwriting standards compared to earlier loans.

Recently, CoreLogic reported delinquencies were down, with the share of borrowers nationally that were more than 90 days late on their mortgage payment, including homes in foreclosure and REO assets, dropping to 7 percent in March 2012 from 7.5 percent a year ago.

As for foreclosure inventory, Fleming pointed out that a migration has taken place where the concentration of states posting higher foreclosure rates moved from the West coast to eastern and southeastern states, such as New Jersey, New York, and Florida.

During the webinar, Fleming also provided some clarification on house price indexes and explained that indexes reporting year-over-year prices showing negative numbers amid positive home sales reports might have to do with what was happening a year ago, and said sometimes negative numbers are negative because of a really good spring season a year ago.” ( End of DSNews.com article.)

Link: http://www.dsnews.com/articles/index/is-this-bottom-true-one-that-will-stick-2012-05-03 )

Locally, in South Orange County, our most recent lowest point, for our median price, was back in January of 2009, just before the tax credits entered the scene. Local prices DID go up back then, only to slowly drift back, over the year and a half after the credits expired, but have never fallen completely back to that January 2009 low.

Our local real estate market is currently experiencing VERY low housing inventories, coupled with a surplus of buyers, which has resulted in prices not only firming up, but actually nudging up, as well. Now is a great time to be a seller, and I expect that to continue through the summer.

Falling Consumer Confidence Helps Drag Mortgage Rates Lower. For Now.

Bob Phillips — Thu, 29 Jul 2010 12:54:49 +0000

For the second consecutive month, U.S. consumer confidence is plunging. July’s official reading is its lowest since July of last year and the figures run in stark contrast to just two months ago, when the index touched a multi-year high.

According to The Conference Board, July’s figures are reflective of a more pessimistic consumer; one concerned about “business conditions and the labor market”.

Falling confidence numbers are presumed to be poor for the economy. For homeowner and home buyers in Coto de Caza , however, they can create opportunity. Low confidence can influence the mortgage market in a positive manner, driving mortgage rates down.

Mortgage rates are already at their lowest levels of all-time.

The link between consumer confidence and everyday mortgage rates roots in consumer spending.

Consumer spending accounts for close to 70% of the overall U.S. economy so, the thought goes that, a less confident consumer is less likely to spend money, thereby retarding economic growth. This harms the stock markets and drives cash to bonds, including mortgage-backed bonds.

More bond demand leads bond prices to rise which, in turn, pushes mortgage rates lower.

The other side of lagging confidence is that Americans may be less likely to take new financial risks when they’re feeling unsure, including buying a new home. This can then drag on the housing market, negatively impacting home prices across California.

Falling home values can help buyers, harm sellers, and stymie would-be refinancers.

It’s tough to predict how consumer confidence data will work its way through the economy, but in the near-term, it appears to be helping mortgage rates stay low. If you’re floating a mortgage rate with your lender, or contemplating a refinance, the time may be right to lock in a rate.

Low rates can’t last forever.

Consumer Confidence Hints At Higher Home Prices And Higher Mortgage Rates, Too

Bob Phillips — Wed, 02 Jun 2010 13:06:58 +0000

The Consumer Confidence Index is rising, a potentially double-edged sword for residents of Trabuco Canyon and for Americans, in general.

According to The Conference Board, economic confidence is as high as it’s been since August 2007 — 4 months before the start of the recession. Americans are optimistic again.

Confidence matters to the economy because as confidence increases, in theory, consumer spending follows. Consumer spending accounts for 70 percent of the U.S. economy.

It’s why Wall Street is responsive to confidence data.

When consumer confidence is rising, households start to make big-ticket purchases they may have otherwise put off indefinitely. Maybe it’s a replacing old appliances; or, trading in an old automobiles; or, splurging on a vacation.

Rising confidence can also spur real estate sales.

When confidence is rising, a growing family that chose to “make do” in their 3-bedroom, 1.5-bathroom starter home may opt to move-up to a 4-bedroom, 3-bath instead at a slightly higher monthly carrying cost. And there are families in every city in every state making those same decisions.

As a result, the housing market gets a boost — especially in the mid-to-upper price ranges. Values rise on higher demand for homes.

The downside is that growing confidence tends to push conforming and FHA mortgage rates up. This is because an expanding economy draws investment dollars away from bonds and into stocks — including mortgage bonds.

The reduced demand for mortgage-backed bonds leads bond prices to fall and mortgage rates to rise. Sometimes by a little, sometimes by lot.

So, if you’re buying a home or thinking of a refinance, rising confidence in the economy may be a signal to act sooner rather than later. Talk to your real estate agent and/or your loan officer about next steps and get your plan in place.