The U.S. housing market will remain stagnant unless consumer confidence improves. That will happen only with an increased pace in job creation, according to a panel of economists from Standard & Poor’s during an online presentation.
Economists from the Standard & Poor’s Indices and Capital IQ divisions hosted “U.S. Housing: Are we recovering?”, an online presentation on market conditions.
Though the housing market in general has stabilized, a lack of consumer confidence shows that prospective home buyers aren’t as likely to enter long term financial commitments, such as a mortgage.
“Housing market conditions generally do not yet appear robust enough to support a recovery in the new single family home market,” Robert Keiser, vice president of Global Markets Intelligence at S&P, said during the seminar. “Global Markets Intelligence Research believes that the pace of U.S. job creation is the key to a full recovery of both consumer confidence and the housing market.”
The average home price of a single family home in the U.S. is $227,100 as of April 2012, down from a peak of $277,900 in 2007, according to a report from the National Association of Realtors.
But without job growth consumer confidence will lag and the housing market will remain flat, which could potentially lead to bigger problems.
Weak job and payroll reports over the past three months have raised concern that the U.S. could be heading toward another recession, Keiser said. The housing market will not recover without a rise in disposable income brought on by improved job creation in the U.S.
“A full recovery to post millennium high watermark standards, if at all, is likely years, if not decades, in the future,” Keiser said during the presentation.
Americans are now leaning more towards buying a home rather than renting, but only slightly.
“First thing to recognize is that we’ve come through one horrendous recession,” said David Blitzer, managing director and chairman of the Index Committee at S&P Indices, during the presentation. “And that has caused a great deal of change. Clearly we are in a sharp disequilibrium situation.”
Blitzer says private homeownership will recover as rent prices gradually rise, but that doesn’t necessarily mean the U.S. will return to peak levels seen in 2005.
“At this point, I would not be overly concerned about that,” Blitzer said. “I think these are normal decisions going on in the private market between renting and owning. I think the balance is in favor of owning”