Psychology & the Market

Most economists will tell you that the market is driven by how people feel about the market. And how they feel about the market is directly impacted by what they hear in the news.

This is as true in the stock market as it is in the housing market.

So, it is no wonder that people (even those with stable jobs and some savings) are fearful of  buying a new home right now. All we hear is how bad it is and we hear speculation of a double dip, despite the presence of some positive economic news (and the lowest prices and interest rates in eons). For instance, there are more sales of homes right now than there have been since most of 2006, all of 2007 and 2008 and half of 2009. The market is robust.

Now, I’m not going to spin a yarn trying to convince you that the economy is peaches and cream. But there are indicators that the economy is going in the right direction. Jobless claims were down and some businesses are reporting profits or are planning for when they will hire again.

Interestingly enough, at the same time, Americans are sitting on a lot of cash. The US Dept. of Commerce reports that Americans have a 6% savings rate, up from about 1% in 2004.

While it is sad that so many have lost homes, buyers should keep in mind that Arizona has some of the cheapest housing in the country. Prices are hovering just above 2009 levels.

All of this means that we have pent-up demand which is just waiting for some good economic news to spring forward. I won’t pretend that all will be sun and roses, but once you hear a few tidbits of good economic news on the radio, watch as those folks who are sitting on their cash to enter the market again.

I never advocate for trying to time the housing market like the stock market. You should buy or sell based on need and life choices. However, if you are nearly ready to get in to the market, don’t underestimate the benefit of getting in right at the moment before that psychology starts to shift.

For those of you buying, listen to the radio. You will hear the same news that others do. We have the lowest interest rates in 40 years and the lowest prices in the nation. The key point to buy will be before that psychological turn-around.

For those of you who are selling homes, be prepared for buyers to bid low until a few months in to a turn-around.

If you want to get a better idea of what is out there, please give me a call at 602-456-9388.