Actually, the exact phrase was "The economy, stupid," which James Carville used to further Bill Clinton's presidential campaign. It wasn't pointed specifically at real estate, but it definitely applies in today's real estate market climate. As the image tells us, the economy is far from simple. There are complex variables in play, and it is a mistake to take any single input and make sweeping predictions. However, the housing market is one of the larger economic influencers.
The National Association of Realtors announced this past week some encouraging numbers in the existing home sales category. According the their report, existing home sales in May reached a six year high, in part spurred by a return of first time home buyers to the market.
Of course, all around the Web and in media, we can get the opinions and predictions of market watchers and economists as to what this good news might mean, or whether it's a temporary spurt that will die down. I also saw an article out there about a family who really wants to buy, but they can't. It's not because they can't afford a down payment, as low down payment options are coming back into the marketplace. It's also not about bad credit, as their credit history is fine.
What they say is keeping them from the American Dream is bills, car payments, credit cards and consumer debt. They are concerned about taking on a mortgage even equal to what they're paying for rent. The economy and concern about job security and future income are the reasons for their inaction.
These are concerns of a family with a fully employed wage earner in a job they've held for several years. Let's take those concerns and multiply them for people who are new to their jobs, or college graduates searching for the right career start. Or, what about people who have held their jobs for a while, but they haven't seen a reasonable pay increase in several years? There isn't a lot of encouraging news right now, especially with a presidential election coming next year. It's time for some politicians to use fear to swing votes, and the uncertainty in election years is not going to spur home sales in my opinion.
There is a lingering skepticism about the housing industry, even eight long years after the collapse that resulted in millions of foreclosures. That's a problem, as home construction has always been a major part of a healthy economy. It's the "chicken or egg" thing, as we need housing to pick up to help the economy, but we need the economy to look better to encourage consumers.
The good news is that months like May with more buying and younger buyers coming back will help to improve consumer attitudes about housing. The family I talked about here actually can probably afford to buy right now, but their concern is a barrier. As that barrier is lowered due to good economic news, they may just pull the trigger without any immediate change in their financial situation.
Like it or not, there is a certain amount of "feel good" influence on home buying. A happy consumer is a spending consumer, and attitudes can turn on a dime. The healing process from the crash that began in 2007 is underway, and it may just be a waiting game to let it evolve into a new buying binge.