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Confidence among homeowners, homebuyers on diverging paths 

On the heels of the most recent Case-Shiller report, which again showed home prices on an upswing, ValueInsured‘s latest quarterly Modern Homebuyer Surveyfinds that confidence among current American homeowners has decreased for two consecutive quarters and is starkly juxtaposed by an increase in new homebuyer confidence.

  • From Q3 2017 to Q1 2018, the nationally tracked housing confidence score for American homeowners fell from 76.9 to 74.3 percent (down 2.6 points) on the hundred-point scale.
  • During the same period, millennial first-time homebuyers, despite reports of the nationwide housing affordability crisis, increased their housing confidence score from 57.1 to 59.1 percent (up 2.0 points).

“We’re seeing the effects of a confident job market and the economy overall, particularly among millennials,” said Joe Melendez, CEO of ValueInsured. “Borrowing standards are also loosening; lenders are more motivated to bring in first-time buyers. These, along with the increased anxiousness to buy, even sight unseen, are likely factors boosting new homebuyer excitement and confidence.”

Confidence to afford home falls
The survey report was not immune to signs of the affordability crisis. While the desire to buy remains high, confidence in one’s own ability to save enough for a down payment trended down, particularly among first-time homebuyers. Only 35 percent said they can afford a down payment, representing a 9-point drop in 12 months.

The concern for affordability is particularly glaring in some of the nation’s hottest housing markets. Only 25 percent of interested new homebuyers in Seattle expressed some level of confidence that they can afford a down payment; in Denver, 31 percent; and in Atlanta, 33 percent.

The survey found millennials believe affording their first home could require some sacrifices. Among possible paths they will most likely take to save for a down payment sooner, the top five are:

  1. Give up or cut down on eating out (59 percent)
  2. Take on a second job (51 percent)
  3. Give up most or all vacations (47 percent)
  4. Give up most or all clothes shopping (39 percent)
  5. Return to live or stay living at parents’ home (33 percent)

With all its hype, crowd funding for a down payment through social media is reported to be the least popular way to save for a down payment, favored by only seven percent of millennials.

Another blemish in homebuyers’ rising confidence is their concern about price sustainability. Only 48 percent of all homebuyers and 42 percent of millennial first-time homebuyers feel positive that a home they buy today will retain or increase in value by the end of 2019.

Homeowners’ concerns growing
While homeowners’ housing confidence remains higher than homebuyers’, it is trending downward. The survey found 58 percent wish to sell but are putting it on hold as they do not want to buy at today’s high prices. 59 percent believe people who buy in their area now are overpaying. This highlights homeowners’ dilemma and the double-edged sword of selling and buying in the current climate.

Thirty percent of homeowners now consider the housing market “unhealthy.” While still a minority, this is the highest level registered since Q1 2016. And for the first time since the inception of this quarterly survey, more than half believe they could witness another 2008-style housing crisis, rising from 37 percent in Q1 2016 to the current 53 percent – another indicator that not all homeowners are optimistic about the market’s trajectory.

“Homeowners’ sentiments have always been a leading indicator of where the market could be headed, as they are more informed and closer to the ground,” Melendez said. “They are also the key to increasing inventory.  If more homeowners become motivated to sell, prices could ease.  This, coupled with rising rates and other economic factors, should signal to new homebuyers to take further precautions when they buy.”

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