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American market has bottomed!

Posted on by peteradmin247

Has the American market  bottomed!

24  August 2011

America’s beleaguered housing and mortgage sector can see non-distressed home prices stabilising, mortgage performance rates improving and negative equity remaining strong, according to a new report from analysts CoreLogic…

And agents working in the American overseas property market agree. they are definitely at the bottom of the market, moving slightly upwards in price

California-based Corelogic’s “U.S Housing and Mortgage Trends” report, out this month, maps a correlation between the housing market, the economy and consumer confidence. According to CoreLogic, “as the housing market goes, so does the economy. The housing market impacts the economy in many ways”.

The report insists that the housing market can be taken as a measure of consumer spending and therefore consumer confidence. Thus, along with the slowdown of the housing market in the second half of 2010, and the slowing economy in the second half of 2011, there came  depreciation in consumer confidence.

According to the Bloomberg Consumer Comfort Index, consumer confident was minus 46.8% in mid July – the lowest since May 2011. Only 6% of consumers said that the U.S economy is doing well, which marks the lowest figure since April 2009.

The drop in consumer confidence may be due to joblessness, with unemployment rates soaring above 9%, declining home prices and increasing rates of foreclosure.

And the recent S&P/Case-Shiller Home Prices Indices shows that the value of properties in 20 U.S cities dropped by 4.5% in May 2011, from May 2010. This is the largest annual drop since November 2009.

Property market has an effect on the economy as a whole. However, the effect of consumer confidence is more psychological. People are relatively poorer. In the good days there was more equity, and thus more consumer confidence, but not everyone took equity out.  Properties sold a lot better psychologically. The standard of living today may not have changed, but psychologically, because of equity depreciation, people are spending less money.

The link between house prices and economy is relevant, however.  50% of people spend less because of a psychological drop rather than a drop in income and standard of living    Send article as PDF   
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