Americans Finally Optimistic About Economy—And Real Estate
- Mar 12, 2015
Call it creeping optimism: according to a number of measures, Americans are now more hopeful about the direction of the economy than they were as recently as last year. That might not sound too important, but it is, both for the wider economy, and for various kinds of real estate. To a considerable extent, the economy isn’t guided by rational decision-making, but by the yin and yang of hope and fear. FDR was precisely right in 1933 when told the nation that fear itself was the enemy of economic recovery: “Fear itself—nameless, unreasoning, unjustified terror, which paralyzes needed efforts to convert retreat into advance.” Fear came back in a terrible way in 2008, and it lingers even now.
But not nearly as much. Hope is back, even optimism. That’s critical because optimistic consumers buy things, with cash or on credit. They buy large things—houses, for instance—and a lot of smaller things to put into them. That benefits the residential market directly, as well as the retail market, and the industrial market indirectly. Hopeful people also travel more, so hotels benefit. When businesses are more hopeful, they hire more, or at least quit firing. They expand their space usage rather than standing pat or contracting, which can be good for the office market.
The latest national survey by the Pew Research Center, conducted in mid-February, found that opinions about the recovery of various aspects of the economy–jobs, household incomes and the stock market–are much more positive than they were two years ago. For example, fully two-thirds (67 percent) of the respondents said that the job situation has recovered at least somewhat from the recession, which is up 20 points from September 2013. Note that people aren’t foolishly optimistic: recovered “at least somewhat” is the operative phrase. And, of course, there’s a steady stream of data to re-enforce that impression. The latest jobs numbers, for instance, but also the fact that more jobs are open now than before (the BLS reported just this week that there are 1.8 workers per available job now, a vast improvement from the pit of the recession).
More broadly, a separate survey done by Pew in early February found that views about the overall economy also have become more positive, although a majority (62 percent) continues to describe the news as “mixed.” For the first time since the Pew Research Center began tracking this question in December 2008, about as many are hearing mostly good news (18 percent) as bad news (17 percent) about the economy. In previous surveys, negative views had consistently surpassed positive impressions. All this makes a case for optimism, but not excessive optimism. It’s an important ingredient in a healthy economy and real estate market.