Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

27 responses to “Consumer Confidence Hits 5-Year High”

  1. Ron

    Naysayers can put a negative spin on this news but confident people take more risks and invest more. I think this report is another sign that the current rally has legs.

    The custom home across the street from my house is nearly done and it looks beautiful…I think it revitalizes the entire block. I met the builder a few days ago who said she now has the summer off considering it will probably sell like a hot-cake after it’s listed. She builds one home per year. Now that is one mighty nice way to make a living.

    To all you people on this board who hate bike lanes and bike paths – well, the bike path through Fremont brought about 1000 naked bikers to my neighborhood last weekend and many of them were fabulous to look at. Go suck that!

    Rate this comment: Thumb up 8

  2. Erik

    I am having trouble linking this data to housing prices. I see July 2007 was a peak for consumer confidence and a peak for housing prices. February 2012 was the bottom for housing prices so far, but this chart shows consumer confidence bottomed out December 2009, which is over 2 years prior to the bottom of housing prices so far.

    Is it fair to say that consumer confidence peaks coincide with median housing price peaks, but consumer confidence valleys don’t coincide with median housing price valleys?

    Rate this comment: Thumb up 3

  3. ZipStyle Seattle

    Not surprised to see this.

    Rate this comment: Thumb up 0

  4. Dave0

    RE: Erik @ 2 – This consumer confidence data is nation-wide, while the July 2007 peak you mention is for local real estate prices. Nationally (i.e. Case Shiler’s Composite Indexes) the real estate peak occurred in June 2006. The drop in consumer confidence in 2007 was a nation-wide realization that the real estate boom was over and lending was tightening up. In other words, consumer confidence was a reaction to the housing market.

    Recently, the return of increasing housing prices is a reaction to consumer confidence. People are feeling better about the economy and their employment situation, and are more willing to commit to owning a house as a result.

    Rate this comment: Thumb up 4

  5. Blurtman

    Consumers are the last to know. Moooooo…..

    Rate this comment: Thumb up 7

  6. ARDELL

    RE: Erik @ 2

    The consumer confidence data matches The DOW vs home prices, as home prices are a lagging market. The DOW reflects a more immediate price change reaction, while housing takes longer to play out.

    A more immediate indicator, or closer to immediate, would be reflected in change to volume of homes sold before home prices. Volume of sales was impacted well before the peak as to pricing.

    Rate this comment: Thumb up 2

  7. Erik

    RE: ARDELL @ 6
    Good point. I’m trying to compare Consumer Confidence to Median House Price. I should be comparing Consumer Confidence to Housing Inventory. Thanks.

    Rate this comment: Thumb up 0

  8. redmondjp

    But what about Microsoft employee confidence and its resulting effect on Eastside housing prices?

    Rumors are that big reorganization details are being released (internally) next week, during which many employees will be away for the 4th of July holiday. Will this just be reducing the headcount at the top, or all the way down?

    Stay tuned!

    Rate this comment: Thumb up 3

  9. ARDELL

    RE: Erik @ 7

    Not inventory as that is what is left standing after sold. You want to look at sold volume, possibly pending volume, but not “inventory”.

    Rate this comment: Thumb up 1

  10. ARDELL

    RE: redmondjp @ 8

    You have to couple that with Google expansion plans for Eastside numbers.

    http://seattletimes.com/html/businesstechnology/2020543320_googleexpansionxml.html

    The biggest push as to prices this year did not actually come primarily from Microsoft. 98005 likely had the highest price increase along with annexed areas of Kirkland. Most of that price push did not come from Microsoft employees. It did not come from Google either, though I expect Google to be a factor given their takeover of the property next to the existing property which doubles their work force. Not sure how much of that is already accounted for.

    The above link is from March. Does anyone know how much, if any, of that hiring has already happened?

    Rate this comment: Thumb up 3

  11. Erik

    RE: ARDELL @ 10
    This is all starting to make more sense. The annexed area is Finn Hill, North Juanita, and Kingsgate. Us South Juanita folks use to be made fun of as uncool and poor. People would say that South Juanita thinks they are part of Kirkland, but they really aren’t because the area wasn’t as nice. Now we’ve incorporated Kingsgate, so we look like high class all of a sudden.

    This has brought the prices of South Juanita closer to DT Kirkland and also increased prices in the annexed areas. Have we drug the prices in DT down closer to our level?

    Rate this comment: Thumb up 0

  12. Ira Sacharoff

    RE: ARDELL @ 10
    Do you think it was the wages/employment/hiring in recently annexed Kirkland that caused the prices to rise so much, or was it the fact that these places were annexed? Or something else?

    Rate this comment: Thumb up 0

  13. mike

    RE: Erik @ 2 – Curious whether your engineering program required any economics courses. Mine did, and I also took an extra concentration in 300 level Econ as a major elective. But aside from that, there is no reason to expect consumer confidence to track house prices. Prices tend to move in long cycles where consumer confidence is based on short term conditions. You’re also looking at a national index and comparing it to Seattle’s market specifically. Nationally, home prices were already in a downward spiral when consumer confidence peaked in 2007. Home sales on the other hand do tend to track confidence, but it takes a while for sales trends to translate into pricing trends.

    To sum it up, you’re looking for a correlation that doesn’t exist. I highly recommend reading Calculated Risk to get a better understanding of how certain economic trends factor into one another and the economy as a whole. I’ve been reading it since around the time it started in 2005 and it’s given me far better understanding than anything I ever learned in a University, although the econ background certainly helped me understand the subject matter.

    Rate this comment: Thumb up 6

  14. wreckingbull

    RE: Blurtman @ 5 – You joke, Blurty, but you also know the truth.

    Erik, divert your attention from the shiny thumbs up/down buttons because some actual investment advice from a random dude on the Interwebz is coming your way.

    Contrarian investing against the herd of sheeple can be a very lucrative technique. When you hear people saying phrases like “selling like hotcakes” pay attention. It is an important signal.

    That is all.

    Rate this comment: Thumb up 4

  15. Erik

    RE: mike @ 13
    I took engineering economics in my undergrad. It was like F=P*(1+i)^#years. That was the most important equation, so i tried to remember it. I took a good business class in my masters program in mechanical engineering, but I was taking 3 grad classes that quarter plus working full time, so it was all kind of a blur. I ended up skipping most lectures and doing the homework because I simply didn’t have the time. I probably missed some stuff.

    I will check out that book on amazon and see if I can better understand some of these economic trends. I’m sure it would pay off. I don’t have an econ background. More like math and physics.

    Wreckingbull- I do understand somewhat the idea of when everyone says to buy, it’s time to sell and visa versa. So basically when people say everything is great, I consider selling if the time is good. Can you advance my understanding of the concept? You aren’t really a random guy on the interwebz, you are the leader of the people that paraphrase tim and give general economic comments as you just did. I thought we established this? That’s why you are known as “Wreckingbull and the goon squad.”

    Rate this comment: Thumb up 2

  16. mike

    RE: Erik @ 15 – It was always surprising how a lot of engineers struggled in Statistics classes given the strong math background. Econ, when it comes down to it is mostly just statistics.

    Rate this comment: Thumb up 1

  17. wreckingbull

    RE: Erik @ 15 – Listen to mike. Read CR. Quite a bit of discussion about indicators, which are perceived as leading, which are perceived as trailing. The folks there tend to favor housing industry indicators.

    http://www.nahb.org/reference_list.aspx?sectionID=819

    Understand which tend to be trailing and which tend to be leading.

    That is all I can offer, as I view a home as a place to stay dry, sleep, and take a dump. Not a get-rich-quick scheme.

    Rate this comment: Thumb up 4

  18. Erik

    RE: wreckingbull @ 17
    Okay, it sounds like this is something to read. I’m not looking to get rich quick. It would be nice, but that is not my expectation. I’d like to be rich when I’m 40 and then retire early. I think it is possible if I can figure this stuff out and get a little lucky. I think now is a good time to be able to make money in the market since it’s so volatile right now. I would atleast like to stop paying a mortgage and own my home outright. Paying interest or rent is expensive and it seems like a big waste of money. Owning outright would make me pretty happy.

    mike- I do well in statistic classes. I passed that grad school class with the least effort I had to put into any grad school classes. I don’t struggle with economics and statistics, I just haven’t been exposed much. And when it comes to those subjects in school, I can pass the exams without studying because its just math and a general understanding easily picked up in lecture. I will get that book and pay attention.

    Rate this comment: Thumb up 1

  19. ARDELL

    RE: Erik @ 11

    Not really Eric, and I am going to lose the ability to comment soon so Ira, your answer should be in here.

    In the pricing patterns of Kirkland there is always land valued higher vs lower, and Juanita picking up Kingsgate does not in any way, shape or form improve the numbers for Juanita. Also the properties most impacted in Juanita are north of 124th along 100th up to Simonds Road i.e. those that used to have a zip code of 98011 and now have a zip code of 98034. You are not in that value stream.

    There is no unfair bias against Juanita (nor is there a goon squad). Juanita land value is not as high as West of Market land value or East of Market land value. That is not a bias, nor is it calling you a second class citizen. It is simply a fact of property values.

    All land values are not equal, and Juanita land value is always lower than West of Market. Just is. Not a put down for that to be the case. You can perceive it to be a put down, but that’s up to you.

    Rate this comment: Thumb up 2

  20. David Losh

    RE: ARDELL @ 19

    OK, I’ve just wasted a comment on the open thread with your new good buddy erik, or Erik, as the case may be.

    I personally think Juanita will be bulldozed as prime property, the way Ballard is being razed. So, the land value has yet to be determined.

    Never mind, my actual question is why you would respond to Erik, or erik, as the case may be? He seems nutty to me.

    Rate this comment: Thumb up 3

  21. ChrisM

    RE: mike @ 16 – “Econ, when it comes down to it is mostly just statistics. ”

    Interesting, I thought it was a religion!

    If only they were able to assume Econ 101 students knew calculus, a tremendous amount of time could be saved…

    Rate this comment: Thumb up 2

  22. Blurtman

    RE: wreckingbull @ 14 – Rear view mirror, though.

    I prefer to take my cues from EF Hutton.

    http://www.youtube.com/watch?v=ftwAhqIXR3o

    http://www.youtube.com/watch?v=SX7ZEotoFh0

    Rate this comment: Thumb up 0

  23. ricklind

    RE: mike @ 13

    Thanks, Mike for Calculated Risk. Interesting site.

    Fel Temp Reparatio

    Rate this comment: Thumb up 0

  24. ricklind

    RE: wreckingbull @ 14

    I think what WB just said is that consumer confidence is often a contrarian indicator. I agree, but I’m not sure confidence has peaked yet.

    Fel Temp Reparatio

    Rate this comment: Thumb up 0

  25. Ron

    RE: ricklind @ 24

    “I think what WB just said is that consumer confidence is often a contrarian indicator. I agree, but I’m not sure confidence has peaked yet.”

    Right on – consumer confidence can change with any significant event and the average joe is typically behind the curve trying to figure things out but right now consumer confidence is breaking out and that means, in my view, the masses will spend more $$ in the near term – good for housing I would say. It doesn’t matter if this housing market is pumped up for all the wrong reasons. There is no such thing as a market that is not manipulated by someone, somewhere, and it’s nonsense to suggest otherwise.

    Rate this comment: Thumb up 3

  26. wreckingbull

    By Ron @ 25:

    RE: ricklind @ 24

    It doesn’t matter if this housing market is pumped up for all the wrong reasons.

    Perhaps you did not hear about this:

    https://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%9308

    I think we can file this one under ‘it mattered’.

    Rate this comment: Thumb up 1

  27. Ron

    RE: wreckingbull @ 26

    You’ve stated the obvious but what is your point? That do to the financial crisis potential homeowners should avoid the market altogether? and for how long?

    Rate this comment: Thumb up 0

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