NEW YORK (AP) – Oct. 25, 2011 – The Consumers’ confidence Index dropped more than six points to 39.8 in October, down from 46.4 in September. Economists surveyed by FactSet had expected a reading of 47. (A reading above 90 indicates the economy is on solid footing).
Economists watch consumer confidence closely because consumer spending accounts for about 70 percent of U.S. economic activity. The index measures how shoppers feel about business conditions, the job market and the next six months. It had been recovering since hitting an all-time low of 25.3 in 2009, but has recently declined as Americans continue to worry about stubbornly high unemployment, higher prices for food and clothing and an overall weak economy.
Consumers’ short-term outlook, which had improved last month, fell in October. The survey indicated that those expecting business conditions to improve over the next six months decreased to 9.1 percent from 11.8 percent. Those expecting more jobs in the months ahead slipped to 11.3 percent from 11.9 percent, and those expecting an increase in their incomes dropped to 10.3 percent from 13.5 percent. The consumer confidence index is based on a survey conducted from Oct 1 through Oct 13 with 5.000 randomly selected household nationwide.
MY TAKE: I thought it a good idea to revisit the consumer confidence index this month, since the current concern about the economy is a major driver to the sluggishness of the housing recovery. For the last 2 years following the recession, consumers (and by association home buyers have been tentative in re-entering the housing market. Let’s see how this is reflected in Pembroke Pines housing sales and prices locally. I have used Four bedroom Single Family Homes for my benchmarks. The data is shown below.
The data shows that in comparing the three month period 7/1/2010 – 10/1/2010 with 7/1/2011 – 10/1/2011, we see a drop of about 5% in the number of homes sold, and a median sale price drop of 5% from $287,000 to $272,000, mostly attributed to Banks willing to negotiate better discounts on short sales. Bank Owned Property prices remain steady at about 20% below market. With housing prices and interest rates at all-time lows, buyers are finding great deals. Regular home sellers can take heart that they are gaining a better share of the Home Buyer market. Owner Owned properties now run consistently at about 60% of sales, where 2 years ago it was closer to 50%.
As has been my theme for this year, and as the local data supports, the real estate recovery will continue to be measured in years, not months. I believe that the data this time next year will show similar minor deviations up and down along the same lines we see now. The housing recovery will strengthen with buyer confidence which will follow jobs and improvements in the general economy. Many view this situation as a catch-22 holding the belief that the economy cannot recover until housing recovers. After 12-months of distancing itself from continued intervention, Washington is starting to revisit ideas to stimulate and hasten the housing recovery. The most recent proposal would allow homeowners to refinance regardless of the fact that the owe more than their homes are worth, eliminating the previous limit of 125% loan-to-value. The over arching government objective is to stem more properties being added to the market inventories of short sales and foreclosures thereby speeding the recovery of home values. We will continue to keep our eyes on the changes.
I strive to keep you informed with balanced information to assist you with your on-going real estate assessments. Please contact me if you want to know more about specific selling needs or buying opportunities, or if you have any other real estate concerns that you would like to discuss.
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