According to the Miami Herald, the Consumer Confidence Index moved up from 67 to 70 per cent, and Miami-Fort Lauderdale home prices rose by 0.5% between May and June. Even though home prices were down 23% from last year, they’re moving toward stability.
In addition, the Florida Association of Realtors said Broward-Miami homes sales showed double digit increases over their figures from a year ago. Since many families have most of their wealth tied up in their homes, the fact that prices are rising, albeit infinitesimally, and sales continue to increase, is probably behind the small uptick in confidence. But, until unemployment dips well below the current 11% mark, we are not likely to any large leaps in the confidence index.
Yet, while the housing market dominated the news with its continuing rise back into prominence, the stock market took a hit. The S&P 500 Index fell 0.2%, and the Dow Jones Industrial Average fell by 0.5%. While these are not large drops, the figures detract from the good news generated by housing.
However, according to one money manager quoted in Bloomberg, while we may have left the recession behind us, the economic environment is still problematical. It remains in slow growth mode.
For the housing market in South Florida, as well as the rest of the nation, that slow growth mode will keep housing prices from moving up too quickly. If the economy continues to grow at a modest pace, house prices will remain low, and provide continuing opportunity for first time buyers to purchase a home of their own.
As more homes move out of the market, prices will continue their process of stabilization in most areas of the country, with the glaring exceptions of Detroit and Las Vegas, where supply remains overabundant. Inventory has moved from historic highs of a 29 month supply two years ago down to about a 9 month supply now. A six month supply of homes in the market is considered normal. Therefore, as the recession starts to recede in our memories, we are likely to continue our home buying spree.
In fact, KB Homes, moving in the opposite direction from the Dow Jones, moved up 1.6%. So while new homes sales are hardly robust, they continue to show mild gains. If the housing market continues on its path of confidence, it is likely to boost the stock market in the long run. After all, people who own homes with positive value consider themselves financially healthy. As their financial health continues to improve, they become more comfortable about spending money. When consumers increase spending, the stock market responds positively to this stimulus.
It is evident that those of us in the housing sector are doing our best to keep the economy moving. I can only hope that those in the financial sector will work harder so that our good news in housing is paralleled by good news in the stock market.
Written by Marc Jablon, Realty Associates
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