Housing Market and Consumer Confidence

The Case –Shiller index shows that property values on homes are continuing to decrease. Since 2003 homes have hit the lowest value we have seen in 20 major cities and there are a lot of homes in the process of foreclosing which will hit the market soon. It may take years before we come out of this housing crisis.

Along with the foreclosure problem, we are also facing an increase in unemployment. Currently unemployment is at 8.3%. It is a lot harder to take out a loan due to stricter guidelines creating a decrease in the amount of homes being purchased.  These issues are causing the value of homes to decrease.

Senior US economist at Capital Economics Ltd. In Toronto, Paul Dale said, “With the foreclosure pipeline still full to bursting, it’s hard to see this downward pressure on prices abating,” and “I wouldn’t be surprised to see prices continue to fall this year and maybe into next year.”

Consumer confidence is lacking because of the troubled housing market. While consumers are losing equity in their homes they are worried about the lack of job opportunities and if we will ever recover from this economic crisis. As the housing market takes a plunge consumer confidence falls from 66 in April to 60.8 in May of 2011 our lowest level in six months. This has created a decrease in spending by the public, which makes up 70% of our nations gross domestic product.

Instead of buying a home more people have been choosing to rent. The reason being is due to the fact that we have seen more than 3 million homes go into foreclosure. There has been a rise in renting all over the US creating an increase in rent (inflation) and cutting into the purchasing power of the people. We are expected to see more foreclosures in the future. This will lead to more demand for rentals and a decrease in the supply of rentals will create continue to put pressure on prices.

These factors determine our ability to recover economically making precious metals favorable to own in times like these. The spot price of gold today is around $1,700 an ounce and silver sits around $33 per ounce. Gold is $200 off of its highest close and silver is $16 off of its highest close. When there is an economic crisis gold and silver tend to do well in these circumstances. Investors buy gold because it provides a safety net in times of economic uncertainty.  Many will buy liberty gold coins online for safety.