Confidence in Housing Goes Beyond the Economic News
By Robert Freedman, Senior Editor, REALTOR® magazine
Consumer confidence is the key to increased home sales, NAR Chief Economist Lawrence Yun told me in a video interview earlier this week. That's something REALTORS® understand intuitively and it's why all of the elements of NAR's four-point legislative agenda are aimed in one fashion or another at giving that confidence a boost. Expanding and improving the home buyer tax credit is a case in point. By opening that program to all buyers and eliminating the repayment requirement, Congress is telling consumers that it's putting its money where its mouth is and investing in the strength of Main Street. Getting high-cost conforming loan limits back up to $729,750 and making that limit permanent is another big confidence booster, and not just for consumers; it would give investors the confidence to buy the securities backed by conforming jumbo loans (those over $417,000) at a lower rate. That means more affordable mortgages for consumers. Confidence is a funny thing because it can be self-reinforcing. Once it starts going up it can trigger a virtuous circle of ever-improving confidence. The trick is getting that virtuous circle started. REALTORS® understand that confidence has overshot downward because of all the negative economic news consumers are hearing. Sometimes it's helpful just to remind people that our homes are more than an economic asset; they're where we live. That's something you can always put your confidence in. Watch the interview with Lawrence Yun now.
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Comments
"Consumer confidence is the key to increased home sales"? Yeah, that sounds like something Yun would say. This kind of talk comes from a mentality that sales are what's needed to "get back on track". Ought our focus be on getting sales...or doing what's best for our clients? Focusing on increasing sales is not what we need to be doing right now. My blog is largely about challenging Realtors to look more deeply into this issue.
Adjusted for inflation, the average American does not make any more money than they did in the 70's. Yet home prices have in some areas increased by over 1000%. This is what we call "being on track"? If we want *actually* affordable housing, then homes need to go back to 1970's pricing.
But what many people want, like Yun, is sales. We want to "keep the industry" going...another way of saying we want to sell more houses, despite what actually needs to happen, which is significantly more price drops and an evening out of our financial imbalances.
Selling more houses at (still) astronomical prices, is not how to get our economy back in shape. Not surprisingly, Yun also thinks the bailouts were a great idea and that we need to do more of the same. Anything to increase sales, right Lawrence?
Do the math in earnest, and you'll see that the average American still could not ever be able to afford a home in any of the more expensive markets in the US without artificially low interest rates and bogus loan products, which is all what caused this mess to begin with.
Posted by: christian | January 19, 2009 03:05 PM