Homebuyers knew, so they wait

After weeks of resistance from the nation’s realtors, builders and mortgage lenders, our policy makers voted to proceed with a tax reform bill that some say would fuel economic growth, while others say could trigger a housing crash. At ValueInsured, we are not political pundits or policy lobbyists; but what we devote ourselves to everyday is homebuyers’ confidence – how we can help them buy their dream home, build memories with their family, while sleeping soundly at night. 

Several days ago, before Congress’ imminent passing of the new tax bill, the National Association of Realtors issued a well-researched report that details home value prognosis. It concluded home value would fall for all states next year, down to forecasting the percentage range of depreciation of a typical home in each state. Coming from an authority such as NAR, that is bound to attract extensive attention from homebuyers, and most certainly from NAR’s own member community of realtors.

Perhaps more quietly, at the same time, Fed members and economists have issued forecasts that benchmark interest rates could increase at least 3-4 times in the next twelve months. Interest rate increases, as we all know, are often precursors to dampening home sales and home prices.

So is the sky falling? Will homebuyers suddenly get scared off and stop buying home? We can’t predict nature and what happens to the sky, but the short answer to the second question is no. 8 in 10 non home-owning Americans – including Millennials – continue to see homeownership as an important part of their personal American Dream (ValueInsured’s quarterly Modern Homebuyer Survey). But if we look closer, we would notice a collective concern for the housing market has already long been set in motion. Homebuyers were way ahead of us. More news headlines in recent days point to slower forecasted growth in home prices – see here, here, and here – but to many homebuyers, they could see it coming.

All the homebuyers who have been waiting on the sidelines, they might now be thinking: we told you so.

In the latest ValueInsured Modern Homebuyer Survey, over half the nation’s interested homebuyers believe their local home prices are currently “at the top” and could be corrected soon. What’s important to note is that this is not a one-time over-reaction; rather it’s an ongoing sentiment that seems to be gaining steam in our quarterly tracked consumer research. What’s worth noting is that the momentum has now crossed the fifty-percent mark: 52% of all Americans now go as far as saying they need to worry about an oncoming housing “bubble”. And 64% of all interested homebuyers are trying to time the market, waiting to act out of concern they could be buying too high.

An article in an Atlanta newspaper reinforces this. Economics writer, Michael E. Kanell at the AJC wrote that the local Atlanta market has been expecting a housing boom fueled by first-time homebuyers. “It was supposed to be 2015. It was supposed to be 2016.” Kanell quoted a respected local housing analyst, John Hunt. Eventually waiting and sidelining could drastically change the landscape of housing demand forever. A generation ago, the writer wrote, the average first-time homebuyer was 25; then they would typically buy again and became a move-up buyer at age 32. Now, the average first-time homebuyer is 33. Eight years of waiting later, a whole generation of homebuyers has been lost.

Bottom line – homebuyers want in, but don’t want to buy the same old way their parents did and, being more fiscally conservative, certainly don’t want to buy crazy high.  So they wait …. for a better balanced solution.