Wouldn’t You Know It? As Consumer Confidence Falls, Home Sales Rise

The housing market is decoupled from consumer confidence surveysConsumer Confidence fell this month for the first time in three months, reflecting Americans’ concern for the economy, housing, and the financial system. 


The reading isn’t much of a surprise given our collective exposure to a near-constant stream of negative news. Before long, the reports become a self-fulfilling prophecy.


Despite falling confidence, however, the housing industry appears to be reviving.  Sales of existing homes are on the rise and an increasing number of homes are under contract to sell.  And, if these statistics seem out of place, consider the external forces that are accompanying this “down” economy:



  • In some markets, home values have plummeted to early-2000 levels
  • Government intervention has brought mortgage rates to near-5 percent
  • Congress is pledging key support to housing and mortgage markets

These points can’t be captured in confidence surveys which, by comparison, ignore facts and focus on Big Picture behavioral questions like “Do you think you’ll be better off a year from now?” and “What’s your attitude toward buying major household items?”.  It’s useful information for economists, but not so much for home buyers.


Anecdotally, a lot of the country’s housing markets have already started their recovery.  Couple that with the natural momentum of Spring Buying and the stimulus package’s proposed first-time home buyer tax credit and you can clearly see the disconnect.


Just because confidence is down doesn’t mean that home prices will be, too.

Post