Economic optimism buoyed by real estate market

09.26.09
By Bill Lapham

Consumers who are wondering if it's the right time to buy a home might want to start working on boosting their credit scores, judging from new economic statistics.

The closely watched Reuters/University of Michigan index of consumer sentiment found that during the month of September, the index improved by a better than expected margin. According to Reuters, the index of consumer expectations reached its highest point in two years, up to 73.5 from 65 last month. The index of current conditions stood at 73.4 this month, compared to 66.6 in August.

"It's very hard to forecast new home sales and they tend to be very volatile on a month-to-month basis. But if we look at the last six months and take out the month-to-month swings, the trend in sales has been higher and importantly the trend in inventories," Hugh Johnson of Johnson Illington Advisors was quoted as saying by the wire service.

Since the housing market is so closely tied to the overall U.S. economy, it's fitting that the increase in consumer optimism comes at a time when the housing market is making noteworthy gains, along with the stock market.

The government is also showing signs of increasing optimism about the economy. For example, Treasury Secretary Timothy Geithner was the latest high-ranking official to cite economic progress during a news conference at the G20 summit in Pittsburgh. Earlier in the week, the Federal Reserve also sent a positive economic positive signal by scaling back the pace of some of its stimulus spending.

Despite the many recent positive economic indicators, one thing that has been slow to come around so far is lending conditions. With that in mind, consumers hoping to take advantage of lower real estate prices while they last need to ensure that they have sufficient credit scores to actually secure a mortgage loan.

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Improved real estate figures are a key part of the economic recovery.