Solano Real Estate Scene: Consumer confidence an economic indicator

The reason this is such an important economic indicator is because when consumers are financially happy and secure they spend more money on vacations, clothes, cars, home improvements and luxury items like boats and jewelry. When people are insecure or fearful it is only natural that they focus on the priorities like fixing what’s broken around the house and the basic necessities of life-like food, health and reasonably priced underwear. When folks see their IRAs and 401(k)s drop by 15 to 20 percent in three months it scares the crap of them and thus they lose confidence to consume. Investor behavior changes when fear is on the street and they move their investments from stocks to cash and bonds, which we call a flight to quality, and bond prices go up and yields fall while stock prices tumble because there are more sellers than buyers. This flight to quality is why for more than the past 60 days mortgage rates have fallen by 50 basis points in rate and the yield on the 10-year treasury bonds have dropped from 3.25 percent to 2.75 percent, even though the federal reserve chairman raised rates in December by .25 percent. Warren Buffett says that “when others are fearful, it may present a good value buying opportunity.” Many homeowners freeze in markets like this and it is only natural for financially smart and conservative people to be cautious and not do anything rash or irresponsible, but not moving forward can also be a lost opportunity. If a homeowner has a mortgage loan balance of $190,000 at a 4.5 percent rate on his or her $450,000 home and is carrying $50,000 in higher rate personal debt, it is probably time to refinance and consolidate all this debt into a new 15- or 20-year fixed rate mortgage. This could also be the perfect time to sell and move up to that larger home you have been talking about the past few years. Sellers nowadays are willing to accept your offer contingent upon the sale of your home, which was something nearly impossible in 2016 through the first half of 2018. Contact your local mortgage professional and your local Realtor for a free, no obligation analysis of your 2019 options today.