According to a recent Gallup Poll investor optimism surged in December, reaching highest level since February [Gallup]

Investor optimism surged in December nearly matching its February high for the year. This strong positive reaction to the sharp drop in gas prices at the pump during recent months is all the more impressive given the continued uncertainty among investors concerning the future volatility of energy prices over the next year.

As a result, many investors could be surprised by a potential slowdown. Whats amazing about this poll, is only 86% of all investors surveyed have ever heard of a so-called “housing bubble.”

Of those 86% half give it a few more months, 38% say its about over and 8% say its over now.

77% of investors expect housing prices to remain the same or continue increasing over the next year and 21% expect a modest decline. Only 1% expect a rapid price decline.

Seasonal pattern – “Investor optimism surged 29 points in December and now stands at 79 — its highest level since February when it reached 82. This is the fifth straight year investor optimism has increased between November and December.”

If housing does slow down, “a Merrill Lynch & Co. report in August 2005 asserts that the real estate boom has accounted for about half of the economic growth and jobs created over the past five years. While such estimates are extremely difficult to substantiate, this assertion appears to have considerable face-validity. The traditional ripple effects of a strong housing market have been magnified in recent years as many consumers have liquefied their housing wealth gains by way of home equity loans and lines. This is one reason consumers have been able to maintain their spending throughout periods of economic adversity during the past five years.”

Gallup concludes that investors could be right and the slowdown in the number of units sold may not weaken housing prices but that would be inconsistent with historical trends.

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