Last week we had two good personal data points concerning housing which set us in motion for additional research.
With residences being one of the larger assets for many, a downturn in prices i.e. 07-09 … caused pause for much of the consumer due to a drop in asset value, creating a negative feed back loop, thereby lowering confidence and spending.
Things may look different this time.
Initial Data Points On Housing/Residence
The jury is still out on all of this, and we would think commercial i.e. Office Properties, raw land, and other similar assets may see negative pressure initially coming from our current situation and the easy pivot to Virtual ….
However a silent winner, or at least a stabilization of value may be residential. It makes sense as there are usually winners and losers when change occurs.
With two noted sales last week, we set out for more information on what may be occurring.
The MBA Purchase index, (includes all purchase mortgage applications) has bounced back strongly and is back to about 90% of the original tracking high, set just a few months ago. Hat Tip RB, for bringing this to our attention, we were very surprised!
Here is a good chart, which is copyright protected, as such, not included in this post.
Mortgage Rates Lower – Included in the nice bounce back of the Purchasing Index above, are the following updated lower Mortgage rates … a second positive to go with the consumer and residence real estate.
While this lowered mortgage rates took time to develop (blip in chart), due to a dash for cash and a wave of refinance, along with underwriters concerns of consumer credit health, due to heightened unemployment, it does appear lower rates may be adding wind to the sails of residential market.
Consumer Confidence – One of the most widely followed confidence indexes, the University of Michigan Sentiment index last week released their latest results, and found surprisingly the index jumped higher than expected, mostly based on current situations, likely associated with the light at the end of the tunnel of openings.
Here is a chart from last month, again copyright restricts last weeks results, but this index bounced back to almost 74 last week…again surprisingly.
Certainly headed in the correct direction.
So a hot New Homes Mortgage Purchasing Index, along with lower Mortgage rates and a happier than expected consumer may lead to additional good news for the economy, spending, asset prices, and an eventual return to a more normal!
It’s early, and things could change quickly, but the initial bread crumbs look VERY positive!
Have a Great “Positive Consumer” Day!
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth