Look around and you’ll see ground-level signs of activity everywhere in the housing market. Traffic at open houses are up; we’re seeing more users and more leads from TREB.com and The Real Estate Book; mortgage applications and homes sales numbers are lifting from their winter lows.
The tone is neatly captured by a post on Seeking Alpha this weekend that couples some long-term trends in the stock market with mother-in-law research into the housing market.
My brother in Indianapolis says he has a number of buyers who are ready to buy, but they cannot sell their houses. That may not sound like good news, but it is. Just a few month ago, he said things were completely dead. The fall in mortgage rates is definitely putting more people in the market, and I’m hoping that one of them is interested in one of my brother’s clients’ homes, so a fortuitous chain reaction can begin.
My sister-in-law in Arizona says she has had more activity in the last few weeks than she has seen in months.
What’s driving the shift in perception and how sustainable is it?
Hanley-Wood Market Intelligence quickly captures the state of the housing market in their most recent market update. This table tells it all:
Every metric related to affordability is at an exceptional level: mortgage rates, as well as existing home and new home affordability ratios.
The metrics related to demand? Low consumer confidence, high unemployment and a glut of inventory are the key drivers of a reluctant home buyer. The immediate outlook for individuals is uncertain, and there appears to be more than enough homes: Why take a risk and act now.
Big Research’s April Executive Briefing shows a consumer who is feeling better about things, but still watching the purse strings tightly.
Although unemployment rose in March, increasingly confident consumers are holding out hope for improvement over the next six months… although more than half (51.9%) contend layoff levels will rise, this figure fell more than six points from the previous month (58.2%). One-third (34.5%) predict layoff levels will remain the same (v. 30.8% in March), while 13.7% are holding out for a decrease, up from 11.0% last month. Concerns with becoming laid off are also moving downward…8.1% fear the pink slip in April, compared to the 9.0% who felt the same last month.
While consumers are predicting a silver lining economically, they are remaining realistic with their finances over the next three months…decreasing overall spending is the top financial priority for April (among 36.4%, rising from 33.6% in March), while paying down debt is a close second with 35.6% (down slightly from 36.1% last month). Additionally, more than a quarter plan to increase savings (28.2%) and/or pay with cash more often (25.2%). With mortgage rates reaching record lows, refinancing homes is also becoming more popular…6.0% plan to refinance in the next three months, almost double the amount from a year ago (3.2%).
That absence of a firm demand foundation will continue to hold the housing market back. A recovery will develop as the factors holding down demand strengthen: more confidence around jobs, a growth in consumer confidence and a working off of inventories. These factors won’t fall in place like a puzzle; they’ll firm up gradually, like setting concrete.