By Jeremy Olshan
Shoppers haven’t been this optimistic about the economy in years. That is, those shopping for everything except a house.
Those are the conclusions of two reports released today: one showing, according to the Conference Board, that consumer confidence saw a huge boost in recent months; and the other, from S&P/Case-Shiller, indicating that housing prices fell 3.4% through October compared to a year ago. There’s little confidence when it comes to housing, says S&P Indices’ David Blitzer, because consumers have virtually no faith the market will improve anytime soon. And there’s evidence to back up their gloomy outlook, he says.
Despite record-low mortgage rates, and home prices that have fallen to 2003 levels, home buyers would prefer to keep waiting, Blitzer says. “It’s pretty easy to say for yourself, ‘they’re going to keep going down’ – and if you had said that a year ago, you would have been right on the nose,” he says. “It’s hard to have much confidence as a home buyer in a market in which anybody who buys a house is considered a bit crazy.”
Other real estate analysts agree that in many markets prices have yet to hit bottom. “Prices are going to continue to drop. It’s not going to be the freefall we have seen, but single family homes are likely to drop as much as another 5% in 2012,” says Jack McCabe, a housing analyst in Deerfield Beach, Fla. “We may be headed for a double-dip recession.” Part of the problem is the large number of homes still facing foreclosure, and as a result, the increasing number of homeowners becoming renters, he says. “It also doesn’t matter how low interest rates get if banks are unwilling to write mortgages.” That said, McCabe does think it may still be a good time to buy, for long-term investors.
And, there have been some reasons to think housing may turn around. Though dominated by apartment buildings, new home construction is on the rise, and unemployment has declined, Blitzer says. “Before confidence in housing can be restored, the economy is going to have to do a lot better in 2012,” he says.