Consumer Confidence

In part three of our five part series on "When is the Best Time to Sell A Home" we examine some of the broader national issues which affect the overall atmosphere of home buying and selling.

The confidence of consumers is critical to trade. The "Consumer Confidence" report is a measurement taken by the Conference Board, an independent not-for-profit organization who polls 5,000 representative U.S. households; it’s bit like taking the pulse of the average consumer. Of course when consumer confidence is high-or rising-buyers tend to be more bullish. The effect that the release of these numbers has is a bit like the tail wagging the dog. In fact, it is a measurement of what a predetermined group of consumers think about the future, and when the numbers are released they can have either a positive or detrimental effect on the average consumer mindset; just watch what happens on Wall Street after the numbers are released.

Consumer confidence is directly affected by a multitude of issues facing our country (global and national) and can vary widely yet not have a dramatic affect on housing. This is particularly true when the reason in the confidence drop was not caused by jobs or housing. Our involvement in Iraq was an excellent example when consumer confidence dropped precipitously and home values remained relatively high.

The Consumer Confidence model was indexed relative to 1985 when a baseline value of 100% was attributed. The latest report in July-right before the widespread news of the sub-prime mortgage news hit the airwaves. It had rebounded from 105 in June to 112 in July and we expect it to drop considerably at the end of August. Low consumer confidence can be found during the trough of most real estate cycles.

Watch for Part IV-How new job creation affects buyers and seller…

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