While driving to an appointment on Friday, I tuned in to NPR’s Planet Money segment. The topic was When It Comes To Buying Decisions, Why Feelings Come First and how these feelings are measured by the Consumer Sentiment Index.
Don’t know about you, but prior to the broadcast I never heard of the Consumer Sentiment Index. Curiosity took hold, I listened intently and did a little research afterwards to find out how it relates to the real estate market.
First off definitions:
- Consumer Sentiment is a statistical measurement and economic indicator of the overall health of the economy as determined by consumer opinion. Consumer sentiment takes into account an individual’s feelings toward his/her own current financial health, the health of the economy in the short term and the prospects for longer term economic growth.
- The Consumer Sentiment Index measures emotions. Companies use it to help them decide how hopeful people are, how much they’re going to buy, how many cars they should stock, how many Winnie the Pooh stuffed animals they should stock.
Research took me to The Realtors Confidence Index, an important indicator of housing market strength based on a monthly survey sent to over 50,000 real estate practitioners nationwide. Here is the information garnered in their 2.23.2015 report. Overall, it mirrors market conditions in St. Petersburg.
- Rising prices and shorter number of days that properties were on the market
- Tight inventories, especially for affordable and in good condition properties
- Qualifying for a mortgage remained generally difficult under tight qualification standards used by financial institutions
- Reduction in FHA mortgage insurance premiums
- Optimism about the outlook for the next six months, possibly due to the improving job market and the efforts to ease access to and lower the cost of credit.
Issues of concern:
- Extremely low inventory in many markets especially for affordable homes that are also move-in ready, leading to rising prices and multi-bidding
- Buyers still have a hard time qualifying for a mortgage, although credit tightness is easing
- Appraisal issues relating to valuation and delays, especially in states where prices are rising
- Home inspection and repair issues are causing delays and terminations
- Cost of home insurance is increasing for older homes
- Increase in flood insurance (e.g. MA, FL, NY)
- Slowing demand from international buyers (e.g., Canadians) due to strong US dollar (FL, CA)