Consumer Confidence Continued to Improve Through The End of The Year

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The first full week of 2022 is now behind us and months of forecasting the future will begin being realized. Like every other year the primary drivers of any real estate market are consumer confidence, jobs and interest rates. This Week in Real Estate the Conference Board reported consumer confidence continued to improve through the end of the year, rising 3.9 points in December, the highest level since July. Below are a few newsworthy events from the first week of the new year that influence our business: 

2021 Was One Of The Best – And One Of The Toughest – Years For Housing, 2022 Will Not Be So Different. Across a range of government and private measures, house prices have posted their largest year-over-year increases, rising to record-shattering highs. In nominal terms, prices have catapulted past their 2006 peak, and are 10% to 15% higher after adjusting for inflation. In turn, housing opportunity has declined to its lowest point in at least a decade as measured by the National Association of Homebuilders and Wells Fargo. While the month-to-month pace of appreciation has been slowing, it remains nearly double the long-term average and is easily outpacing private sector wage gains. For homeowners and sellers in an overwhelming majority of markets and submarkets, unprecedented price appreciation has translated into substantial gains in equity and proceeds, respectively. Whether a hold or a sell, both groups reaped the benefits in 2021. Supported by 30-year financing rates that remained below 3.0% for 31 of the year’s 52 weeks (see Freddie Mac’s Primary Mortgage Market Survey), refinancing volume climbed to $1.6 trillion over the first two quarters. Many of the underlying conditions driving house prices in 2021 remain intact in 2022. Modeling a wide range of scenarios for the macroeconomic environment, Chandan Economics’ baseline housing forecast shows price appreciation slowing, but still outpacing household income growth.

Consumer Confidence Improved In December. Consumer confidence continued to improve in December as inflation concerns eased after hitting a 13-year high last month. Spending intentions for homes, cars, and major appliances all increased. However, consumer spending will continue to face headwinds from higher prices, Omicron surge and reduced fiscal stimulus in 2022. The Consumer Confidence Index, reported by the Conference Board, rose 3.9 points from 111.9 to 115.8 in December, the highest level since July. Consumers were more optimistic about the short-term outlook. The share of respondents expecting business conditions to improve increased from 25.6% to 26.7%, while those expecting business conditions to deteriorate declined from 19.6% to 17.9%. Similarly, expectations of employment over the next six months were more favorable. The share of respondents expecting “more jobs” rose by 2.3 percentage points to 25.1%, while those anticipating “fewer jobs” fell by 4.2 percentage points to 14.8%.

Home Ownership More Affordable Than Renting In Majority Of U.S. Housing Markets. ATTOM released its 2022 Rental Affordability Report on Thursday, which shows that owning a median-priced home is more affordable than the average rent on a three-bedroom property in 666, or 58 percent, of the 1,154 U.S. counties analyzed for the report. The data shows that home ownership is more affordable in a majority of the country, as it was in 2021, following another year when the benefits of rising wages and super-low mortgage rates counteracted the effects of home prices spiking around the U.S. Prices have shot up more than 10 percent in most of the country over the past year as a glut of home buyers, partly spurred by the ongoing Coronavirus pandemic, chase a tight supply of homes for sale. “Home-prices are rising faster than both rents and wages while wages rise faster than rents. And the housing market boom of the past decade keeps pushing home values to new records. Yet home ownership still remains the more affordable option for average workers in a majority of the country because it still takes up a smaller portion of their pay,” said Todd Teta chief product officer with ATTOM. “Prices can only go up by so much more before renting becomes financially easier. For now, though, rising wages and interest rates around 3 percent are enough to offset recent price run-ups and keep ownership on the plus side of the affordability ledger compared to renting.”

Did you know every home listed for sale with Berkshire Hathaway HomeServices Northwest Real Estate and Berkshire Hathaway HomeServices Real Estate Professionals are eligible to receive no-obligation home warranty coverage from American Home Shield or 2-10 Home Warranty the first six months the home is listed with our company?

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