Home Values Slow, Turning Housing Market 'Dicey'
NEW YORK (TheStreet) — Consumer confidence rose again last month. But slowing home values could put a dent in that confidence, especially if that slowdown becomes a decline in the final months of 2014.
The Conference Board's confidence index was up to 92.4 in August, up from 90.9 in July. Americans aren't necessarily taking the long view on the economy, but, with the exception of household income, they do like what they see in the short term.
"Consumer confidence increased for the fourth consecutive month as improving business conditions and robust job growth helped boost consumers' spirits," says Lynn Franco, director of economic indicators at the board. "Looking ahead, consumers were marginally less optimistic about the short-term outlook compared to July, primarily due to concerns about their earnings. Overall, however, they remain quite positive about the short-term outlooks for the economy and labor market."
But if Americans see the value of their homes slow down, that could be a game-changer for consumers. Homes represent one of the largest — if not the largest — investment they own.Read More: Home-Flippers Take Breather Even as Mortgage Rates Decline Home sales were down by 3% in July and are down 12% on a year-to-year basis, according to RealtyTrac. July's numbers represent the third consecutive month in which home sales are down on a year-to-year level. Median home prices are up 3%, but home values have slowed in 65% of the nation, RealtyTrac says, as more purchases of pricier homes have hidden weaker pricing activity in midsize and smaller homes. "As distressed sales continue to decline, the share of sales is tilting toward more expensive homes, boosting the nationwide median sales price," says Daren Blomquist, vice president of RealtyTrac. "The nationwide home price increase, however, masks slowing home price appreciation in the majority of housing markets across the country." Blomquist says he is not surprised by weakening home values, but it is a situation that bears watching. "This slowing appreciation was expected and provides another sign that the real estate recovery thus far is behaving rationally," he adds. "Still, the housing market is entering a dicey transition phase where it is becoming much more reliant on first-time homebuyers and move-up buyers to sustain the recovery as investor involvement wanes." Read More: What It Means to Have Foreclosures at Six-Year Lows Those "home-flippers" investors are edging away from home purchases as their profits fall, and RealtyTrac reports that only 31,000 single-family homes were flipped in the second quarter of 2014. That's 4.6% of all U.S. home sales, down from 6.2% a year earlier. But regionally, at least, pricing activity remains strong. Some states, such as Michigan, Virginia and Ohio, did see larger home sales percentages - in fact, annual price jumps of more than 20%, RealtyTrac reports. Yet with 65% of the nation's housing market reporting stalling home price values, consumers may pay closer attention to their home values. It's not enough to erode confidence in the economy, but slowing home values could play a larger role in consumer sentiment on the economy in the last few months of 2014.
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