Consumers Are Bummed by Politics, but Still Determined to Buy Homes
Consumers Are Bummed by Politics, but Still Determined to Buy Homes
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Economists say that our presidential candidates deserve an F for addressing economic matters in a meaningful way. Judging by the latest consumer confidence data, most consumers agree.
The Conference Board reported this week that the Consumer Confidence Index declined 2.1 points in May. That’s the lowest level since November. Consumers had soured on the present situation, as well as expectations for the future. The Expectations Index is at its lowest level since February 2014.
Yet ironically, intentions to buy homes and automobiles have continued to increase. Six percent of respondents in May said they intended to purchase a home in the next six months. The last time we had a higher percentage in the month of May was 2005!
The purchase intentions data follow what we’re seeing in the real world. April was a very strong month for home and auto sales, and May should remain strong.
So what’s going on here? If people are feeling less secure about the future, why are they buying cars and homes?
Here’s the reality: Our economic circumstances are not as bad as the presidential candidates—each loudly calling for change—want us to believe. Unemployment has declined significantly and is approaching what economists call “full employment.” Job creation remains positive, albeit at a lower pace than the past few years. The risk of a recession remains very low.
Especially on the home-buying front, we have substantial pent-up demand as a result of delayed household formation, elongated time in existing homes, and the tight supply that has characterized the housing market over the past two years. The alternative to owning a home, renting, is becoming less and less financially attractive as rents escalate.
According to realtor.com®’s daily traffic surveys, the No. 1 issue keeping potential buyers from buying a home throughout last year and again this year is simply being unable to find a home for sale that meets their needs.
The last piece of the consumer puzzle is low interest rates. Mortgage rates are currently near three-year lows. From a historical perspective, rates are in cray, cray territory, especially for a growing economy.
While our remaining presidential candidates and their collective visions for the future are so far failing to appeal to any majority, there are more than enough households feeling good about their personal circumstances.
Next year’s occupant of the White House will not change people getting married, having children, heading into retirement, enjoying an increase in income, investing in a second home, and taking advantage of incredible financing opportunities.
I have a suggestion for the spring and summer. Turn off the news and put on Justin Timberlake’s “Can’t Stop the Feeling!” When you stop dancing, go on out there and buy with confidence.
In a few years, when mortgage rates are substantially higher and home prices and rents are also higher, you’ll smile when you hear that song and think of the summer of 2016, when you bought your home while others fretted about meaningless politics.
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