Strong Price Gains Fuel Market Confidence

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By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

Intero value #14 is confidence.  Confidence /con·fi·dence/ •noun.  Freedom from doubt; belief in yourself and your abilities.

Housing Market ChartConfidence is also the word in housing this week. At least that’s what we’re hearing from some of the top companies in housing finance.

JPMorgan Chase revised its forecasts for the industry, prompted by large gains in home prices. And Fannie Mae released its monthly national housing survey, showing a sharp increase in consumer confidence in the housing market.

Home prices could grow as high as 7.2% this year, according to JPMorgan’s new report. Analysts at the bank studied prices and demand conditions as the market moves into summer. They revised 2013 predictions higher as well as projections for 2014 and 2015, with an expected 3.9% and 3.2% growth, respectively.

JPMorgan points out that all-cash sales remain higher than 30% of housing sales, indicating that investor demand is still strong. Investor demand is fueling higher prices in the lower-tiered markets in major metropolitan areas.

Meanwhile, Fannie Mae’s recent monthly housing survey showed Americans’ confidence in their ability to buy and sell a home rose sharply in May. The share of respondents who say now is a good time to sell a home climbed to a record high of 40%, compared to 30% in April and 16% a year ago.

The share of respondents who say it’s a good time to buy a home also increased, moving up 5 percentage points from April to a survey high of 76%.

Fannie Mae found that Americans are also more confident in home prices, with the average 12-month expectation increasing 3.9%, compared to 2.7% in April.

Confidence may not seem like a hard indicator for housing, since it’s a sentiment rather than a measurable tangible like sales and prices. But it actually plays an important role in every real estate transaction, an exchange that is perhaps the most emotionally charged of any financial transaction a person will make.

When consumers feel more confident in the economy, they feel better about their job situation. When they feel more confident in the housing market, they feel better about their purchase and sale decisions.

At the micro level, that confidence can mean the difference between making a move and sitting still. At the macro level, it can move the market needle in either direction. The strong gains in confidence in housing going into summer are a significant indicator of where we’ll end up this year. The gains in sales and prices are going to far exceed previous expectations.

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