Home prices keep going up, so are concerns

Have we entered a new territory where it’s boring to talk about records yet? It seems when it comes to the housing sector, every week a new record is broken: fewest days on market…check; lowest inventory…check; highest average sales price…check. Last week, the median existing home sales price at the national level was reported to have hit an all-time high of $252,800 in May. Median number of days for a home on the market is now 27 days, the shortest since tracking began. For-sale home supply now sits at 2.7 months, again – you guess it – a new record.

As home prices continue to heat up in many parts of the country, consumer jitters and unease also seem to be higher. ValueInsured has tracked Americans’ confidence in the housing market through its quarterly Modern Homebuyer Survey. There is no correlation that supports higher home prices correlate with higher housing confidence (higher home prices have mostly likely been driven by low inventory and low mortgage rates, among other factors). However, there is indication that as home prices break record after record, more Americans also relive their post-traumatic stress from the 2008 housing crisis:

  • The ValueInsured Housing Confidence Index is currently at the lowest level – at 67.7 out of a 100-point scale – since Spring 2016. The index tracks consumer sentiments along seven housing confidence-related markers, covering confidence in housing market health at the national and local levels, as well as the investment benefits of buying over renting.
  • Concerns for another housing crisis have also gradually gone up in the same period. In Summer 2016 – when the S&P CoreLogic Case-Shiller U.S. National Home Price Index was reported at 182.14 – 53% of all Americans said they lack the confidence a housing crisis 2.0 would not happen again in their lifetime. Fast forward to a year later in Spring 2017 – when the latest Case-Shiller Index is at 186.95 – now 60% of all Americans lack the confidence a housing crisis 2.0 would not happen again in their lifetime. This measure has steadily gone up in ValueInsured’s survey every quarter; in other words, Americans’ confidence in housing stability has steadily gone down in the past year.
  • Interestingly, Millennials – many of whom were too young to personally suffer financially from the 2008 housing crisis – appear most concerned about the possibility of another housing crisis.  Over 6 in 10 (62%) Millennial say the 2008 housing crisis has made them concerned about the risk of buying a home now.
  • Millennial homeowners, in particular, are most pessimistic about a housing bubble. Nearly 7 in 10 (68%) Millennial homeowners believe there will be a housing bubble and home price correction in their local area within the next 2 years. 

As we draw to the close of Q2 2017, ValueInsured is gearing up to survey American homeowners and homebuyers again for its Summer 2017 Modern Homebuyer Survey in July. After three consecutive Federal Reserve-led interest rate hikes, and home prices seemingly not letting up in many parts of the country, the stakes could be higher for American homebuyers this July. Stay tuned to join our tracking of where home prices are headed this summer, and see if concerns for a housing crisis 2.0 may reverse course. So far, those two lines seem to enjoy parallel momentum and are heading straight up.