Is the American housing market healthy?

Last month, Fannie Mae – a perennially reliable source we trust – found a 5 percent-point drop in Americans’ home buying confidence from a month prior, and an 8 percent-point drop from a year ago. At the same time, reported sentiment of “now as a good time to sell a home” shot up 21 percentage points year-over-year.

We are also hearing more about emerging housing trends that some might consider unconventional: dramatic increase in second units of housing built in a relative’s backyard, rising desirability of living in a trailer park. These – along with tiny homes, among other new home-buying trends – may be results of decreasing housing affordability, but do they indicate the market is unhealthy?

  • The good news: many experts believe in our current housing health. The rise in FHFA’s announced maximum conforming loan limits for 2018 – and the Fed’s reported plan to raise interest rates at least three times this year – was positive sign to many that our federal government is confident in the economy and our housing market.
  • Not-as-good news: home buying is emotional; and often “housing health” is in the eye of the beholder – or emotional homebuyers.  

In ValueInsured’s latest Q4 2017 Modern Homebuyer Survey, 58% of all homebuyers believe the American housing market is healthy. This represents a drop of 4 percentage points from those who gave their vote of confidence in Q3. In the same national survey, 75% of all existing homeowners believe the American housing market is healthy, also down 4 points Q3. Seventy-five percent is not bad, but it also means 1 in 4 homeowners who are actually invested in this market do not believe it is currently in good health.

When asked if they have “complete confidence” in the health of the American housing market, only 16% of all existing homeowners – and 11% of all homebuyers – answered affirmatively. Both figures again trended down from the previous quarter.

The largest segment of non-believers of the health of the American housing market is among non-homeowners who want to buy a home in the near future. This should not be a surprise, as many homebuyers are reported to have been struggling in today’s overheated housing climate. 4 in 10 (41%) of all non-homeowners who want to buy in the near future believe the American housing market is healthy, down from 44% in Q3. Among Millennial first-time homebuyers, only 35% believe in the health of our housing market, down from the last quarter with a marked 11 percentage-point drop from a year prior. A dismal 3% of all Millennial first-time homebuyers now express “complete confidence” in the health of the American housing market. It is the lowest level recorded in 18 months.

Other notable findings from the survey:

  • 49% of all women vs. 66% of all men believe the American housing market is healthy.
  • Self-identified recent immigrants are among the most optimistic in American housing health, with 73% saying they believe it is healthy, compared to 57% who do not self-identify as a recent immigrant who say the same.
  • Urban Americans express more confidence in our housing health, with 60% vs. 51% of respondents who live in rural areas believing the housing market is healthy. 
  • Starter-home buyers (48%), buyers of homes under $150,000 (42%) and homebuyers who plan to contribute a 0-3% down payment (31%) are among the other segments that are least confident that the American housing market is healthy