Housing outlook for 2017? More affluent does not equate more optimism

In January 2017, ValueInsured released its latest Housing Confidence Index that reported a slight decline in Americans’ overall housing confidence. The drop was driven by existing homeowners, who are not as confident now as they were in Fall 2016 that their home would be worth as much as what they paid for. This makes sense, since ValueInsured’s fall index was reported in early September, some of the country’s most overheated markets have stabilized and there were steady reports of cooling home prices throughout the remainder of 2016. This was partly driven by the fall 2016 interest rates hike, election uncertainty, and by buyers’ pricing fatigue.

Concurrently, some of the same factors have driven housing confidence among non-homeowners higher in the same reporting period. While interest rates are higher, they remain at historically low levels. Meanwhile, cooling prices have given prospective buyers more optimism that homeownership could be within reach.

Dissecting the January Modern Homebuyer Survey data further, what’s particularly interesting is that more affluent American households – typically more confident in housing given their stronger purchasing power – are not reporting the highest housing confidence levels among other income cohorts today:

  • 60% of all Americans surveyed with HHI $200K+ were confident that the 2017 housing market will become more favorable for them. 74% of HHI $75K-$100k, 77% of HHI $100k-$125k, and 85% of HHI $125k-$150k shared the same confidence.
  • 64% of all Americans surveyed with HHI $200K+ were confident that the housing market will become more favorable with this new White House. 65% of HHI $75K-$100k, 68% of HHI $100k-$125k, and 78% of HHI $125k-$150k shared the same confidence.
  • 0% of all Americans surveyed with HHI $200K+ were confident that if they were to buy a home now in 2017, it would be worth more in 2018. 63% of HHI $75K-$100k, 74% of HHI $100k-$125k, and 35% of HHI $125k-$150k shared the same confidence. 22% of respondents in households with income $150k-$200k believed the same. These findings with margin of error +/- 4.0% provide reasonable indication that more affluent households are concerned about the pricing outlook of homes in their area.

Some industry experts predicted that as home prices become too heated in the most expensive markets in America and far outpace wage growth, homebuyers will give up on those markets and buy in the city outskirts, or in other more affordable markets. As housing is always cyclical, it would be interesting to see if this will temporarily drive down demand in 2017, cool prices as some homeowners in expensive markets seem to fear, and bring back more buyers again.