Consumers are becoming ever more confident in the economy. Continuing job gains, lower gasoline prices, and rising home values are likely contributing to the sentiment. Interesting though, that REALTORS® were feeling less optimistic in the past month.
The latest consumer confidence index reached a 7-year high mark. In October, the index was 94.5. The long term average is near 100. The overall improvement in the economy is no doubt contributing to better consumer feelings. This consumer confidence index is about the whole economy and not specifically related to home buying. But consumers need to be confident of the general economy in order even consider making a major expenditure such as buying a home. Therefore the rising consumer confidence portends better for the housing market outlook.
REALTORS® in September expressed an opposite feeling with the index falling to its lowest mark in 2 ½ years. And the assessment of the condominium market has been consistently lower than that of the single family properties.
Pending contracts to buy a home have been rising in recent months (though still down from one year ago). So unless REALTORS® are expressing their sentiment based on intangible factors, like changes in the number of client appointments or lower foot traffic at open houses, the weakening confidence by REALTORS® seems uncalled for.
The confidence data cannot decipher if high-producing REALTORS® are just as pessimistic as the general REALTOR® population. We know that 20 percent of REALTORS® earn more than a six figure income while 30 percent of REALTORS® earn less than $15,000 a year (with the rest earning in-between). It is presumed that confidence and earning are correlated.
The U.S. Capitol dome is currently undergoing a major reconstruction. This dome is indeed a truly remarkable engineering feat and a thing of beauty. But one of the best known domes in the world covers a church in Florence, Italy designed by an architect Brunelleschi over 500 years ago. He and his crew, many of them orphans and labeled as “men without names,” built the dome without construction cranes or other modern equipment. He built it to honor God and, possibly and more importantly, to raise hope of what people are capable of achieving. There is nothing like confidence to get things done.
Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.