How 78 Consecutive Days Of Falling Gas Prices Helps Sell Real Estate

For the 78th consecutive day, gas prices fell nationwide yesterday. At $1.81 per gallon, the average price at the pump is less than half what it was at its peak in July.

And, although gas prices vary by locale, the cost of a fill-up is worthy of national news.

The main reason why national gas prices matter is because of something called the Wealth Effect -- people's tendency to spend more money when they have a perceived feeling of being worth more.

Low gas prices can amplify the Wealth Effect, leading to higher levels of consumer spending nationwide -- the primary driver of the U.S. economy.

But, more important than the Wealth Effect is the reverse Wealth Effect. That's when consumers have a perceived feeling of being worth less, and their spending reflects it. This past summer is a terrific example of it.

Soaring gas prices, Wall Street troubles, and negative campaigning constantly reminded Americans of what was wrong with the economy. It follows, therefore, that retail sales figures plunged in September and October. Once the election passed, however, and gas prices fell, a gentle optimism returned.

Not surprisingly, consumer confidence rose in November.

All of this matters to real estate because as Americans regain their confidence and feel more "wealthy", they will be more likely to make "move up" purchases, buy new home appliances, and take other actions that propel the economy forward.

Oh, and mortgage rates trolling at 3-year lows certainly helps, too.

(Image courtesy: GasBuddy.com)

The Strength In New Home Sales Shows That Banks And Builders Have Figured Out The Market

Despite turmoil on Wall Street, the housing sector continues to deliver good news.

Last month, led by a 22 percent surge from the West Region, New Home Sales rose 2.7 percent over August.

A "new home" is a newly-built residence, never before lived in. New homes are usually built and sold by real estate development companies and their respective marketing firms.

The surge in New Home Sales volume is consistent with the other good news we've seen from the housing sector. It marks the 4th positive signal in the last two weeks.

• October 8: Homes under contract to sell surge 7.4 percent
• October 23: Foreclosed homes fall 12 percent in September
• October 24: The supply of "used homes" falls to an 8-month low
• October 27: The supply of new homes falls by 7 percent

However, it can't be ignored why housing is showing a statistical improvement. The main causes are two-fold:

1. Banks are getting better about selling foreclosed homes
2. Builders are keen to dump their excess inventory

Both of these factors drive down home sales prices nationwide which, in turn, draws value-seeking home buyers back to the market. In addition, because the number of active sellers dwarfs the number of active buyers, today's home seekers enjoy a tremendous amount of negotiation leverage, making real estate even more attractive.

But, as with everything in business, markets seek balance. As home supplies dwindle, buyers' ability to negotiate sales prices and closing costs will fall. It's Supply and Demand -- as supplies drop, relative demand rises, and prices rise with it.

In every American neighborhood, homes that are priced "right" are selling quickly. And now that banks and builders have figured out the formula, more homes are going under contract than at any time since 2007.

Much of the current economic climate is being blamed on housing. If the data is accurate, though, we can infer that the climate may not last much longer.

(Image courtesy: AP.org)