In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s second update discusses consumer confidence.

  • Consumer confidence dipped mildly in February – from 79.4 to 78.1.  But a decline at this phase of economic recovery is not heartening news.  Moreover, the latest reading is well below the 100 mark that is the historical average.  Consumers just cannot figure out whether to be happier or not.
  • Because of job creations in the economy, consumers are indeed saying it is better in the present.  However, their expectations about the future remain shaky, with a measurable decline in the latest month (76 now compared to 81 last month).
  • A recent separate survey of homeownership showed consumers saying a better condition to buy.  Two-third of consumers (67%) said it is a good time to buy a house, compared to 64% in the prior month.  But home sales activity has come down lately, implying the desire to buy is not matching up with the financial capacity to buy. Or perhaps the excessive underwriting stringency due to new federal mortgage rules is hindering consumers’ ability to buy.
  • Consumer confidence can play a huge role in the economy and to the housing market.  It is also the cheapest form of any economic stimulus as it does not cost any tax revenue provided it can be uplifted in other ways.  Even a presidential election can be pre-determined by how the campaign exudes confidence.  Herbert Hoover’s campaign song was associated with the then popular “Brother, Can You Spare a Dime?”  By contrast, Franklin Delano Roosevelt’s song was “Happy Days are Here Again.”  FDR also promised to repeal the Prohibition which won out over the women’s temperance group campaign of “Lips That Touch Wine … Shall Never Touch Mine.”

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