Fannie Mae has released the results of their May 2012 consumer sentiment survey and the results suggest that consumer attitudes about the economy have plateaued. What was most interesting, however, was that Americans still expected homes prices to rise over 1.4% in the next 12 months and rental prices to rise over 4.1% during the same period.
Consumer sentiment is one of the most important indicators of the housing market. If the consumer feels that their financial condition has improved or will improve, they are more likely to make a large purchase. Based upon Fannie Mae report, the consumer appears to be apprehensive about their economic position but confident about the housing market.
So what does this mean? The Dow has floated between 11,000 and 12,000 since October 2010 (with a brief dip below 11,000 in October 2011). With the continued economic concern of Europe, the upcoming presidential election, and a slow jobs report, I believe US business remains concerned about short and medium term growth. On a bright note, the recent ruling by the Supreme Court on the health care mandate has most likely provided large and medium sized business with some certainty about future employee healthcare expenses, though it will most likely result in further outsourcing of US jobs.
How does this affect the consumer? If US business is concerned about future growth, they are less likely to hire new employees or commence planned capital improvement projects. As a result, we would expect to see continued weakness in job growth, which would negatively impact consumer sentiment.
Below is a link to the Fannie Consumer Sentiment Report: