If the Bay State’s housing market is ever going rebound, our battered local consumers are first going to need a double shot of Prozac just to start eyeing the listings again.
While Massachusetts may be a national leader when it comes to jobs, consumer confidence in the state has actually fallen below even the abysmal national numbers – reaching a depth of despair not seen since the dark days of early 2009, the latest numbers show.
It’s a paradox for which there is no easy answer – given a significantly lower jobless rate, consumer confidence, if not surging, at least should be stronger here in Massachusetts.
But the fallout from our state’s collective sense of depression is not so hard to figure out, especially when it comes to the housing market. When people don’t feel good about their job prospects and their economic future, they don’t buy cars, they don’t splurge on furniture and they definitely don’t make potentially life-changing purchases like buying a house.
Nor, unless they have to, do they put their homes up for sale. In fact, along with a steep drop in sales, we are also seeing a major pullback by sellers as well, according to local economist Fred Breimyer.
“Many, many individuals at this point are not happy with the real estate situation, they are not happy with the jobs situation, they are not happy with the political situation. In general they are not happy,” noted said Breimyer, regional economist for the FDIC in Boston, of the latest consumer confidence numbers in Massachusetts.
Down And Out
So how glum are we?
Mass Insight recently released its quarterly measure of consumer confidence across the state.
And a careful reading of the Massachusetts Consumer Confidence Index reveals two disturbing trends.
For the first time since the early months of the recession – spring 2008 – consumer confidence in Massachusetts is actually lower than that of the country at large.
Second, the percentage of those describing jobs as “harder to get” has risen to 57 percent, a significant jump from the already high 50 percent who answered that question affirmatively in the spring.
In fact, more Massachusetts consumers believe business conditions will be worse in six months than better, by a tally of 24 percent to 20 percent.
“With talk of a double-dip recession and uncertainty about what the federal government is going to do next, consumers aren’t spending and businesses aren’t creating jobs,” said Mass Insight President William Guenther.
Whatever else they’re not buying right now, Bay State consumers are certainly not buying homes.
Despite the double dip in the real estate market, home prices have yet to fall through the floor. Boston area home values were down just 2.1 percent in June compared to the same time last year, according to the latest Case-Shiller report.
No Clear Bottom
But sales, a more crucial indicator right now, haven’t really stopped falling since the home buyer tax credit ended last year. In fact, in a move that is likely draining even more life out of the market, sellers have also stepped back dramatically when it comes to simply putting their homes on the market.
The number of home listings on the market in Massachusetts has dropped roughly 25 percent since the spring of 2010, down to just under 34,000 homes, according to Breimyer.
In fact, all it would take is for a thousand additional listings to get pulled off the market and we’d be back to the comatose home sales market of 2009, when the Great Recession was still officially on the books.
The economists may say the recession is over, but Bay State consumers – and potential home buyers – aren’t buying it.
Yes, our high-tech and biotech companies are hiring – and thank God for that. But financial services firms are getting ready to cut thousands of more jobs, and the hard-hit construction market has yet to recover.
More importantly, local consumers and home buyers are down about just about everything right now. And until the gloom starts to lift, it’s hard to see anything really changing in the real estate market.
“It’s a story of a market that has not found a clear bottom,” the FDIC’s Breimyer said.
