For nearly two years, the majority of key indicators that the economy is recovering has been moving in the right direction, however, home sales have remained in the dumps.
Unfortunately there are many day-to-day realities that are holding back the housing market:
Job growth is slow
• Job growth is back, but corporations have found ways to do more with less; increased worker productivity is great for companies but not for the unemployed.
• There are still 7 million people employed today, and the unemployment rate remains high at 9%, but 15.9% are underemployed or have given up their search.
Income doesn’t match inflation
• The median income is 6% below where we were in 2008 and has only increased marginally in the last two quarters.
• Inflation has been putting pressure on us since late last year, with gas prices up 38% from one year ago (according to AAA).
Home values are declining … again
• Home prices are 31% below their peak in 2006 and are heading lower in many ZIP codes, which is the result of having 23% of all mortgages valued at more than the house value.
This all contributes to the lack of consumer confidence, especially when it comes to buying a house. While confidence has improved, a confidence level of 65 is 30 points below its 44-year historical average.
The good news is that confidence is on an upward trajectory. Although we believe that the road to recovery will be long, we are excited that the fundamentals for recovery are moving in the right direction.
This information was adapted from an article written by Wayne Yamano, who is vice president at John Burns Real Estate Consulting.