Although the economy has officially been out of recession for quite some time, those aspects of economic behavior most important to the real estate markets, namely, jobs and borrowing, have remained stuck in the ditch. The latest data suggest, however, that consumers will soon be spending more. Jobs are growing at a faster clip, and consumers have done much repair to their personal finances.
Since the end of 2008, consumers have cut 10 percent off their credit card debt, a very large amount that gets them back to where they were before the real estate boom. With finances at pre-boom levels, consumers will be buying things again, although more cautiously this time around.
Renewed spending is showing up in the retail sector, where jobs at clothing stores were up 4 percent over last year, and jobs at restaurants were up 2 percent.
Job gains also continued in manufacturing, health care, and business services, with jobs at temp agencies up a very strong 16 percent. Overall job gains in the past year were almost 1 percent, despite the fact that local governments, with lower tax revenues, cut more positions. If we see total job gains around 1.5 percent in the next few months, home sales will pick up rather smartly.
After falling steadily since 2007, home prices have bottomed out in many local markets. On average, prices were down just 1 percent in the past year. With prices low, mortgage rates low, and consumer finances largely repaired, a much better real estate market can be expected this year.