While housing bears most of the blame for a slowing economy, it's becoming clear that consumers are paying attention to other economic data before they jump back into buying homes.

Consumer confidence in the strength of the economy is down, according to the Conference Board, a private economic research group which indexes consumer confidence. The index fell to 102.9 in November from a revised 105.1 in October.

Consumers showed their reluctance by failing to spend as anticipated this past holiday shopping weekend, particularly at big-box Wal-Mart where the retailer announced the worst holiday opening weekend in 10 years.

This is significant because consumer spending accounts for approximately 70 percent of U.S. economic activity, and many worry that a slow holiday start will mean even less spending in 2007. This caused the worst stock sell-off on the Monday after Thanksgiving in years. The Dow lost 1.2 percentage points and the NASDAQ lost 2.1 percent.

Durable goods orders were also down 8.3 percent in October, effectively wiping out September's 8.7 percent gain, according to the Commerce Department. That's the biggest monthly drop in orders for durable goods since July 2000.

The good news is inflation is "better behaved of late," according to Ben Bernanke, chief of the Federal Reserve. Accordingly, interest rates have dropped, pushing mortgage interest rates at merely a quarter percentage rate higher than they were a year ago at this time, in 40-year-low territory. This has encouraged a modest gain in housing for the month of October. Year over year, home sales are still down 11.5 percent (6.24 million units compared to 7.05 million), but a .5 percent increase has encouraged David Lereah, NAR's chief economist, to say that market fundamentals are improving.

"The present level of home sales demonstrates some confidence in the market, but sales are lower than sustainable due to psychological factors," he said. "The demographics of our growing population, historically low and declining mortgage interest rates, and healthy job creation mean the wherewithal is there to buy homes in most of the country, but many buyers remain on the sidelines. After a period of price adjustment, we'll see more confidence in the market and a lift to home sales should be apparent in the first quarter of 2007."

The psychological factors seem to be strongly inhibiting to homebuyers because other signals are all greenlit. Unemployment is down (4.6 percent) and wages are up. Interest rates are down. And housing prices are down -- the median price for a home in October was $221,000, a decline of 3.5 percent from a year ago -- the biggest year-over-year price decline on record and the third month in a row that home prices have fallen.

The California Association of Realtors recently reported that sales decreased 28.7 percent in October, while the median price of homes was up 2 percent to $548,680.

"While it appears that home sales have stabilized over the past three months, it's too soon to say whether or not the market has bottomed out," said C.A.R. President Colleen Badagliacco. "We do expect smaller year-over-year declines in home sales for the remainder of the year."

"We're seeing a seasonal decline in the median price characteristic of this time of year, although the overall trend is a slight year-over-year increase," she said. "Prices at the regional and county level have shown greater variability, with some areas posting year-to-year declines while others continue to register price gains compared with last year."

California inventory for existing, single-family detached homes in October 2006 was 7.2 months, compared with 3.4 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate. The median number of days it took to sell a single-family home was 57 days in October 2006, compared with 34 days (revised) for the same period a year ago, says C.A.R.

Yet, In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 52.4 percent, or 195 out of 372 cities and communities, showed an increase in their respective median home prices from a year ago. One out of nine U.S. homeowners lives in California.

As always, the above information can signal a bottom, a plateau, or the start of a new boom.

Published: December 1, 2006

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.