Is Economic Pessimism Holding Back the Housing Market?
While we’ve seen a rapid rebound in the market, and some steady gains in recent months, home buying and overall growth in the property sector has remained tepid.
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Since the start of 2014, we’ve seen either flat growth or monthly year-over-year sales figures that undershoot what was recorded in 2013. This is worrisome on a handful of counts, one of them being that stagnancy could cause fluctuations in property sales down the line.
The other concern is that slow home sales could cause a restriction in available property that spikes home sales further, causing even slower property sales in the coming months.
That being said, it seems that much of the unease in the housing market can be traced back to a root cause.
Chilling Effect of Widespread Pessimism
As a recent Los Angeles Times report points out, widespread pessimism about the state of the American economy overall has produced a chilling effect across the housing market.
A recent survey from Fannie Mae disclosed that a full 57% of those polled felt that the U.S. economy is heading in “the wrong direction”.
Related: U.S. Housing Market Hits a Rut
Overall, pessimism around home affordability seems to be mounting. The same report that the Los Angeles Times cited points out a growing belief that homes will become less valuable in the coming months.
Only 48% of those polled (down from 50% in April) believe home prices will increase within the coming year, and a full 7% expressed certainty that home prices would drop. W
hile the 7% figure might seem meager compared to the 48% who estimate that home prices will rise, that also measures as the highest proportion of polled responders within the past year who expected home prices to drop.
So What to Make of This?
Granted, this is far from a doom-and-gloom scenario.
Sluggish sales and purchase slowdown are a far cry from an outright housing crash, and it’s not a completely damning set of data. The amount of those polled who believe it’s a responsible time to sell their house is sitting at 43%.
Despite gut-level responses around whether or not it’s a good time to sell or buy, or whether home prices will rise, much homebuyer hesitancy remains tied to the greater economy. The report quoted in the Los Angeles Times projected that net home sales in 2014 will hit well below what was recorded at the close of 2013.
Throughout the housing purchase boom of 2013, there were persistent questions of whether or not the strength in the buying market would continue for the foreseeable future.
More prescient analysts suggested that the purchase boom would run out of steam if the economy didn’t pace a quick rebound as well. The first wave of major purchases seemed motivated by consumer confidence and a belief that we wouldn’t be experiencing a second bubble, but a lukewarm economy overall hasn’t helped sustain it.
It’s likely that one of the most reliable ways for home sales to pick up would be a corresponding rebound in employment figures and median family income.
Do you think this will happen?
Be sure to leave your comments below!