Consumer Confidence Will Dictate Housing Recovery

So the Chief Economist at NAR (National Assoc of Realtors) predicts housing sales will increase 4% next yr (2012).  Moody’s Analytics (Celia Chen) is more ambitious, thinking a 20%+  jump in 2012. But the much-desired housing recovery will be strangled by one thing above all . . .lack of consumer (homeowner) confidence in that Recovery. You see if house prices soften in the first two quarters of 2012 as expected by many, a good chunk of homeowners will react to negative equity by “strategically defaulting”. It’s a fact that being underwater is a common trigger which causes people to bail. The default and resulting number of foreclosures kicks off a cycle of events which repeats the drop in house prices.  Default leads to foreclosures . . leads to drop in prices . . .leads to negative equity . . leads right back to more default.

If somehow Consumer confidence and faith in long term appreciation in value could hold its ground, we’d see an overall housing recovery quicker and stronger.

Only time will tell  . . .

Tags: buy and bail, consumer confidence, negative equity, strategic default