Consumer confidence rises to a level that could bode well for housing
Expectations of economic growth paint a sunny picture for summer home buying with consumer confidence approaching an 18-year high.
Potential buyers positively assessed income, business and labor market conditions, raising the Customer Confidence Index to 134.1 in May from 129.2 in April.
"Consumer confidence posted another gain in May and is now back to levels seen last fall when the Index was hovering near 18-year highs," Lynn Franco, senior director of economic indicators at The Conference Board, said in a press release.
"The increase in the Present Situation Index was driven primarily by employment gains. Expectations regarding the short-term outlook for business conditions and employment improved, but consumers' sentiment regarding their income prospects was mixed.
"Consumers expect the economy to continue growing at a solid pace in the short-term, and despite weak retail sales in April, these high levels of confidence suggest no significant pullback in consumer spending in the months ahead," Franco continued.
But consumers' mixed view of their income prospects could make them more reluctant to buy housing if home prices outpace their spending power, potentially adding to affordability pressures slowing appreciation.
Housing price appreciation grew 5.05% annually in the first quarter of 2019 — the 31st consecutive quarter to do so, according to the Federal Housing Finance Agency. Prices also rose 1.15% from the closing quarter of 2018.
"Although price growth is still positive, the upward pace is softening across the country, especially among states with the largest supplies of housing," William Doerner, supervisory economist at the FHFA, said in a press release.
Home sales and purchase mortgage application data also suggest that while the housing market is relatively strong, but its outlook is somewhat mixed.
"The pending and existing-home sales data continues to paint a different picture of the housing market, compared to the recent strength we have seen in new home sales and purchase application data," Mike Fratantoni, the Mortgage Bankers Association's chief economist, said in a statement. "Purchase applications have increased 15 straight weeks on an annual basis, and it's likely this positive momentum will lead to increased sales activity as we enter the summer."
April's pending home sales edged up year-over-year, but dropped off from March, according to data from the National Association of Realtors. Existing-home sales also were down slightly in April on a consecutive-month basis.