Consumer optimism about the housing market dips in Q4

'Too many prospective first-time buyers see few options within their budget,' says NAR chief economist

Low inventory, lack of access to affordable homes, and increased buyer competition are starting to wear on homeowners and renters, making them less optimistic about the housing market, economy and their personal finances as the year comes to a close, according to the National Association of Realtors Housing Opportunities and Market Experience (HOME) survey for the fourth quarter of 2017.

The dip in real estate consumer sentiment comes on the heels of record-high confidence levels reported by NAR in Q3.

Sixty percent of renters believe it’s a good time to buy, and 79 percent of homeowners feel the same way — a 3 and 1 percentage point decrease, respectively, from Q4 2016. Meanwhile, the share of homeowners who feel it’s a good time to sell fell 4 percentage points quarter-over-quarter to 76 percent, which is still 14 percentage points higher than last year.

Source: National Association of Realtors

When you dig down into the demographics, households with incomes more than $100,000, households in the South and Midwest, households in rural areas and baby boomers are most confident about their ability to buy right now. When it comes to selling a home, households in the West are the most confident.

Source: National Association of Realtors

NAR Chief Economist Lawrence Yun elaborated in a press release:

“The trifecta of faster economic expansion, robust hiring and low mortgage rates should be generating a surge in optimism and home sales as 2017 winds down. Sadly, this is not the case. While overall demand remains high, it is not translating to meaningful sales gains.

“Too many prospective first-time buyers see few options within their budget and home prices that are rising much faster than their incomes. Until we start seeing a steady increase in new and existing inventory, sales will fail to deliver on their full potential and many would-be first-time buyers will be forced to continue renting.”

Source: National Association of Realtors

 

Households are also feeling less elated about the economy, despite solid GDP and jobs growth. A little over half of respondents (52 percent) believe the economy is improving, a 5 percentage point quarter-over-quarter and a 2 percentage point year-over-year decrease.

Furthermore, NAR’s Personal Financial Outlook Index, a component of the HOME survey that measures households’ confidence in their financial situation and where it will be in six months time — fell 2.9 percentage points to 59.1 in Q4. The index numbers correlate with respondents feelings about rising home prices and their ability to qualify for a mortgage.

Fifty-two percent of respondents expect home prices to rise in their area over the next six months, and 74 percent of respondents making less than $50,000 a year, believe it will be “somewhat difficult” to qualify for a mortgage in the upcoming year.

Overall, increased residential housing starts will be the key to having a healthier housing market in 2018, according to Yun.

“The significant rise in home values and the stock market at record highs are why a majority of homeowners, as well as those with incomes above $100,000, are more optimistic about the economy than renters and those with lower incomes,” he said. “The overall job market and economy are very healthy. If housing supply improves enough next year to boost the nation’s homeownership rate, it’s very likely more households will feel upbeat about their future.”

About the survey

NAR’s HOME survey is released on a quarterly basis. For the fourth quarter, in October through early December, a sample of U.S. households were surveyed via random-digit dial, including a mix of cellphones and land lines. The survey was conducted by an established survey research firm, TechnoMetrica Market Intelligence. Each month approximately 900 qualified households responded to the survey. The data was compiled for this report and a total of 2,705 household responses are represented.

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