This may be a familiar scenario to many real estate professionals. A promising buyer finds a suitable home after extensive house hunting. A mortgage has been pre-approved; the buyer has the down payment in place and the income to afford the new home. And then…cold feet. Or here’s another one: a home seller sits in a lackluster open house, knowing they have priced their home very competitively, and wonders why there aren’t more interested buyers making offers.
Oftentimes, economics is only one factor that helps convert potential homeowners to actual buyers. The psychology of confidence in the housing market can play a crucial role.
According to ValueInsured’s Nielsen Harris Poll conducted in fall 2015, 38% of American renters are not confident they could recover the full amount of their down payment if they were to buy a home today and sell in the next 2-7 years. In the same survey, 63% of renters said they would buy a home sooner if they could have the option to purchase down payment protection. In other words, by lowering the risk of losing their savings, renters could gain the confidence they need to convert sooner to become homebuyers.
We followed up on this fall survey by commissioning another independent research expert to survey American renters. In the spring 2016 study conducted by Equation Research among 1,157 nationally representative U.S. adults, 69% of renters who want to own a home and can afford a down payment said they would buy a home sooner if they could have more confidence in the housing market.
Housing confidence does not only affect first-time buyers, it also affects existing homeowners who have the desire to upgrade. 70% of them said they would sell their current home and upgrade to a new home if they could have more confidence in the housing market. This figure goes up to a whopping 90% among Millennial homeowners, many of whom are in starter homes they have outgrown. By boosting the confidence of this upgrade market, more inventory of entry level homes could be freed up in America, making it affordable for more first-time buyers to fulfill their American Dream of homeownership.