April 23, 2019
Last week we spoke about how wrong the prognosticators were when they said interest rates were going up this year. Lower rates typically represent good news for consumers. But lower rates when we were expecting the worst actually translates into great news for consumers. And there is evidence that consumers are noticing and reacting to this great news.
For example, the latest Fannie Mae Home Sentiment Index showed a substantial gain in optimism. Thus, it is expected that we will have a brighter spring homebuying season than originally forecasted. This seems to be happening even as most analysts believe that economic growth will slow this year. Previously, a weaker real estate market was expected to be a contributor to this slow growth.
The question which follows is — will a stronger home purchase market be enough to bolster economic growth in the coming quarters? It is quite possible if the lower rates spur consumers to purchase more houses, cars, furniture and even refinance their present loans, then we will see better growth than we expected. While this scenario is purely hypothetical–it will be interesting to see if the theory pans out in reality.
Source: Origination Pro