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NAR’s HOME Survey reveals rift in housing market morale

Overall, American sentiment toward buying and selling remains strong, but renters and student debt holders are less confident
  • According to NAR's first quarter HOME survey, Americans' feelings about whether it's a good time to buy have held relatively steady throughout the first half of the year at 80 percent.
  • In comparison, only 62 percent of renters are confident about buying a home, and around half of survey respondents with student debt aren't comfortable taking on a mortgage.
  • The majority of homeowners (61 percent) think that selling now would be advantageous. This number is up from 56 percent in the first quarter of 2016, which may reflect an understanding that the market won’t stay like this forever.

Recent employment reports indicate that more Americans are finding jobs — and that should mean that people are feeling a little more optimistic about their prospects of one day buying a home.

However, there’s something significant still hanging over the heads of many potential homeowners, according to the National Association of Realtors’ second-quarter HOME (Housing Opportunities and Market Experience) Survey, released this morning.

It’s physically smaller than an elephant in the room but equally problematic: that seemingly eternal student loan bill that arrives in the mail (or inbox) every month.

HOME Survey Infographic - July 2016

Buyer sentiments

The survey revealed that about half of respondents with student debt are uneasy about applying for a mortgage — that includes 57 percent of renters with higher education loans, 51 percent of those under 35 and 61 percent aged 55 to 64.

“It’s becoming very evident from this survey and our research released last month that the financial and emotional impact of repaying student debt is contributing to a delay in purchasing a home for many would-be buyers,” said NAR Chief Economist Lawrence Yun in the survey announcement. “At a time of quickly rising rents, mortgage rates at all-time lows and increasing housing wealth, a lot of young adults in their prime buying years are struggling to enter the market and are ultimately missing out on the stability and wealth accumulation that owning a home can provide.”

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Student debt aside, Americans’ feelings about whether it’s a good time to buy have held relatively steady throughout the first half of the year.

In NAR’s first quarter analysis (released in March), 82 percent of homeowners expressed a positive sentiment toward purchasing, not far from the 80 percent recorded in the most recent findings.

The percentage of renters who think now’s a good time to buy has remained unchanged from Q1 to Q2 2016 at 62 percent, however, that level is down from 68 percent in December 2015. Respondents 35-and-under — who may be in their prime buying years — were the least confident that investing in a home right now would be a good idea.

Yun explained how results shed a light on the polarizing realities that homeowners and renters face, and how that affects their place in the market.

“Existing-home prices surpassed their all-time peak this spring and have climbed on average over 5 percent nationally through the first five months of the year and even faster in areas with severe supply shortages,” Yun added in an emailed statement. “Most homeowners appear to realize that if they’re ready to sell, they’ll likely find a buyer rather quickly and be able to use the sizeable equity they’ve accumulated in recent years towards their next home purchase.

“Meanwhile, renters interested in buying continue to face minimal choices, strong competition and home prices growing faster than their incomes.

“Given these affordability pressures, it’s no surprise respondents earning over $100,000 and those living in the Midwest – the most affordable region of the country – are the most optimistic about buying right now.”

Economic outlook

How do Americans feel on an individual level about the financial state of the country? Nearly half (49 percent) “believe the economy is improving,” the HOME survey showed, which is mostly unchanged from December 2015.

The most optimistic respondents included renters, those living in urban areas and individuals located in the West — these survey participants were also the most likely to believe that housing prices will rise in their communities over the next six months.

However, almost two-thirds of individuals residing in rural areas said they don’t believe a rosy economic future is in the cards.

“Reflecting somewhat lessening confidence that respondents’ financial situation will be better in six months, the HOME survey’s monthly Personal Financial Outlook Index of all households slightly decreased (to 57.7 in June) since March (58.1), but is unchanged from June 2015,” the report noted.

Good time to sell?

Home prices continue to rise as inventory enters and exits the market at a rapid pace, which has the majority of homeowners (61 percent) across the country feeling confident that selling now would be advantageous.

This number is up from 56 percent in the first quarter of 2016, which may reflect an increased sense of urgency, and an understanding that the market won’t be like this forever.

“More homeowners acknowledging this pent-up demand may perhaps mean we begin to see more supply come online in the near future,” Yun said.

Moreover, nearly all of this quarter’s respondents expect home prices to rise or at least remain level in their communities (93 percent).

About the survey

NAR’s HOME survey measures consumer sentiment about housing. It covers current topical trends (such as student loan debt), personal financial outlooks, and whether now is a good time to buy or sell a home, the perception of price changes in the housing market and the perceived ability of respondents to qualify for a mortgage.

NAR reports data based on ownership status as well as by age, income and geographic location. It uses a survey research firm to conduct random-digit-dial surveys (including both mobile phones and landlines).

Regional quotas are used based on four census regions and nine census divisions, and each month, approximately 900 qualified households respond to the survey.

The inaugural quarterly HOME survey was released in December 2015.

Email Caroline Feeney.

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