Consumer Views of Home Buying Conditions Have Improved

Nation's Building News
April 22, 2009

Broad measures of consumer confidence by the Conference Board and consumer sentiment by the University of Michigan remained at or below their respective record lows in March — primarily because of the extremely weak labor market conditions prevailing at that time as well as a weak outlook among consumers for income over the next six months.

The University of Michigan regularly asks consumers whether they think it’s a good or bad time to buy a house. The proportion saying “good” has been around 70% in recent months, including March, well up from the cyclical lows posted back in 2006.

The rebound in perceptions of home buying conditions has been driven primarily by lower house prices, but also by lower mortgage rates.

Weak assessments of general economic conditions obviously have been holding back prospective buyers who view house prices and interest rates as favorable.

In March, none of the consumers who rated home buying conditions as “good” cited “good times” as a reason, while a significant number of those saying it was a bad time to buy a house listed “bad times ahead” as a factor.

In previous cycles, home sales ordinarily started up before employment and consumer confidence rose, generally because low mortgage rates and enhanced affordability encouraged some pent-up demand to come onto the market early in the game.

That dynamic hopefully is coming into play at this time, supplemented by the appeal of the temporary $8,000 tax credit for first-time home buyers.