Recent statistics indicate positive trends in the housing market and consumer confidence, defying recession predictions. Despite concerns over rising borrowing rates and low inventory, the housing market has shown signs of stabilization.
The S&P CoreLogic national house price index rose by 1.3% in April 2023, with a year-on-year decrease of just 0.2%. Concurrently, consumer confidence has seen an upswing, reflecting improved current conditions and positive expectations. As the economy navigates challenges such as mortgage rates and potential economic weakness, these developments suggest a brighter outlook than anticipated.
Housing prices, which experienced a decline in mid-2022, have rebounded, supporting the view that the downward trend has ended. Factors such as increased household wages and lower mortgage rates in April have contributed to making homes more accessible.
While higher mortgage rates necessitate an adjustment in nominal house prices for improved affordability, a fundamental shortage of housing supply acts as a floor on how low prices can go. As a result, homeowners with favorable mortgage rates have been reluctant to sell, maintaining stability in the market.
The housing market has witnessed a surge in new home sales, with a 12.2% increase in April compared to the previous month. Year-over-year, new house sales have risen by an impressive 20%. Notably, first-time homebuyers have become an essential target market for home builders, driven by the appeal of new homes with a reduced price gap compared to existing homes.
This trend has been further reinforced by intense competition in the current home market. The increase in housing construction, particularly in the Southern states, has contributed to a growth in existing home inventory, providing buyers with more options.
Consumer confidence has seen a considerable improvement, reaching its highest level since January 2022. This upswing is attributed to enhanced current conditions and positive expectations among consumers. The Conference Board reported a rise in the consumer confidence index from 102.5 to 109.7 in June.
Additionally, Consumers' assessments of the business and labor markets have improved, and short-term expectations have also experienced growth. Notably, consumers under 35 years old and those with incomes over $35,000 exhibit the highest levels of confidence.
Despite the positive developments in the housing market and consumer confidence, some individuals still anticipate a recession within the next 6 to 12 months. However, these concerns have shown a slight decline in recent months, with 69.3% of consumers now predicting a recession, compared to 73.2% in May.
While economists typically define a recession as two consecutive quarters of negative growth, other factors, including the labor market, are also influential.Continued monitoring of mortgage rates and economic conditions will be crucial in navigating future challenges and maintaining this positive trajectory.
