A favorite refrain of economists who specialize in looking on the dark side is that the housing bubble is about to burst, and with it will go consumers’ penchant for spending. Confidence would be zapped and wallets would be zipped.
Others say that a slight slowdown in housing might be healthy. After all, who wants to pay more and more money to buy the same amount of real estate?
For the most part, though, consumers’ attitudes and spending habits look solid. The job market is humming and corporations remain optimistic, offering glowing forecasts of who they will hire and what new facilities they will build.
That brings us to Tuesday’s report of March consumer confidence from the Conference Board, a business research group. Economist Lynn Reaser is looking for a slight uptick, to 102.5, from 101.7 in February. It hit 106.8 in January.
Americans are quite concerned about a possible real estate slowdown, because it appears that many that their homes aren’t worth as much as they were 6 or 7 months ago, said Reaser, of Bank of America’s investment strategies group in Boston.
“The job market remains on an uptrend, generating about 200,000 new positions a month, but there is a concern in the background about the housing market,” she said.
If the trend continues, she said, “a housing slowdown will be the biggest threat to consumer spending for the rest of this year.”
There doesn’t appear to be much mystery about what will happen Tuesday, when the Federal Reserve’s Open Market Committee makes a decision about interest rates. It is virtually certain that policy-makers will boost their short-term lending standard by a quarter-point, to 4.75 percent, the 15th hike in about 21 months.
Chicago banker Kenneth Skopec says it is about time for the central bank to consider how far it can go in squeezing the money supply.
“At some point, members of the Fed will need to say enough is enough,” said Skopec, of MB Financial Bank. “A lot of people are growing concerned about the fate of General Motors, and we are seeing growing pockets of unsold homes.”
Additionally, he said, upwards of a trillion dollars in mortgages will come due this year and next year, prompting refinancings at higher rates.
The short message, Skopec said, is that Fed members must watch their step.
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