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The Good,Bad (not so bad),and the Ugly in Kansas City

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Consumer Confidence

The confidence of the American consumer regarding near-term and longer-term expectations rose sharply in August,following less-than-exciting data the prior two months. A more confident consumer is a key to longer-term U.S. economic performance as consumer spending still represents two-thirds of all U.S. economic activity.

The Conference Board Consumer Confidence Index,based on a survey of 5,000 U.S. households,rose to 54.1 in August,up from 47.4 in July. Consumer views as expressed in the Present Situation Index rose,reflecting some improvement in the nation’s job market. The Expectations Index rose sharply to its highest level since December 2007,tied to a brighter economic assessment by consumers.

While rising confidence is a positive sign,we have a long way to go. The 54.1 August measure compares to an average of 57.9 during 2008. In addition,levels near 90 to 100 signal consumer expectations of strong U.S. economic growth…..still a good sign.

Home Values

Yes,prices were down an estimated 14.9% when compared to the second quarter one year ago. Note,however,that first quarter home prices were down a more painful 19.1% when compared to the same quarter a year ago.

The S&P/Case-Shiller Home Price Index has been one of the more negative measures of home values in recent years. The Index suggests that the average American home value has plunged roughly 32% since peaking in the summer of 2006.

As one might expect,the sharp decline in home prices has led to more people being able to buy a home…if they still have a job. The combination of sharp home price declines and historically low mortgage interest rates,when compared to average family incomes,now suggests the highest level of housing affordability in a generation. Numerous housing markets are seeing much stronger levels of buying interest,particularly in California…

another good sign

Budget Deficits

Spoiling the party is the latest estimate of budget deficits during the next decade,which are simply scary…

We can live with budget deficits averaging $150-$300 billion annually…as bad as that is…we have done it for years. In my view,we cannot live with deficits averaging $1,000,000,000,000 EACH year.

The White House now says the projected deficit over the next 10 years will reach $9.05 trillion,roughly $2 trillion higher than its estimate earlier this year. The culprits are a more serious economic downturn than expected previously,higher joblessness,and less aggressive forecasts as to future U.S. economic growth.

One piece of good news in the report,as well as found in a similar estimate by the Congressional Budget Office,is that the projected deficit for the current fiscal year,which ends on September 30,is now “merely” $1.58 trillion,down $263 billion from the projection in May. The reason is $250 billion included in the earlier estimate for an additional bank bailout is no longer needed…

at least that’s a good sign

Whether you’re thinking about buying or selling or seeking information,rely on RE/MAX Best Associates 800-391-BEST(2378) to provide accurate up to date information about the marketplace email to: info@kansascityehomes.com  or visit http://www.kansascityehomes.com/

“Reprinted with permission from the “Tea Leaf”by Jeff Thredgold. Copyright,2009,Thredgold Economic Associates,LLC. To subscribe to Jeff’s free weekly email update,visit www.thredgold.com.”

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