Only Thing Standing in Housing Market's Way Is Rest of Economy
"The state of the overall economy presents the biggest risk to the housing market," Stiff says. "The economic recovery has stalled each spring/summer during the last three years, and last summer's economic stumble was accompanied by a sharp decline in consumer confidence, which cut into home sales activity and pushed home prices down a little further," he adds.
If confidence were to drop by similar amount this year, either because of the monetary crisis in Europe or the political impasse in Washington D.C., then another downward leg in home prices is possible, Fiserv concludes.
"However, given that owner-occupied housing is incredibly cheap historically and falling confidence would be accompanied by lower mortgage interest rates, we may be at a point where housing markets can finally withstand a weak economy," Stiff concludes.
That would be welcome news to millions of homeowners, if it comes to pass. But after wandering the desert, so to speak, for six years, a long, cool drink of water in the form of higher home values is refreshing.
Rising home values allow homeowners to breathe a sigh of relief, and that can in turn spur the uncertain economy, with many homeowners spending more money knowing their chief financial asset is on the mend, and others selling their homes for more cash, thus allowing them to downsize, which would presumably leave more money in their bank accounts, and more money to spend in the consumer economy.
It's been quite some time since home values were making Americans feel better about their spending power. Let's just hope they don't start mistaking their homes for ATMs again.
More on housing:
All housing bottoms aren't created equal.
9 smart tips for selling your home.
How to get your mortgage above water.
By Brian O'Connell