A realtor we know recently said this: “All homebuyers have buyer’s remorse at some point during the pre-closing escrow period. I never not hear from a buyer after contract signing and before the home closing, some wonder if they paid too much, others may ask if I read a recent article about the market potentially turning.” In a survey conducted last year, Trulia found nearly half of all Americans have buyer’s remorse about the home they bought.
Now, with stakes ever higher in this expensive market, where home payments in some areas are swallowing up 45% of local median income, expectation of buyer’s remorse is high. In the latest ValueInsured Modern Homebuyer Survey, conducted in Q2 2018:
- 62% of all Americans believe people who buy a home now will have remorse about the purchase within one year, due to buying too high
- Interestingly, that figure is higher among homeowners. 69% of all homeowners believe people who buy now will experience buyer’s remorse within one year.
- 1 in 4 Americans went as far as saying the remorse level felt by current homebuyers will mirror the level felt by those who bought right before the 2008 housing crisis
The second finding above at first glance might seem counter-intuitive, given that these are homeowners who presumably would place a higher value on homeownership. However, when layering this finding and other homeowner insights from the survey onto our current housing market, it makes sense. Homeowners in the latest ValueInsured survey are also more likely than non-homeowners to believe:
- A housing correction will happen within the next 1-2 years or sooner (71% homeowners vs. 65% non-homeowners)
- People who buy in their neighborhood now are overpaying (60% homeowners vs. 55% non-homeowners)
- If they were to buy a home now, they would be buying high (67% homeowners vs. 62% non-homeowners)
All these make sense as they are consistent with the unique housing situation we have now where many homeowners are sitting out the market - cautious of overpaying after they sell. Homeowners in California and Texas – two of the most overheated housing states – are the most pessimistic about the sustainability of home prices. 79% of all homeowners in CA and 80% of all homeowners in TX (vs. 71% nationally) believe a housing correction will happen within 2 years. In Texas, 44% of all existing homeowners believe a housing correction is already underway in their area. This again reaffirms the astute sensibility of homeowners who seem to have foreshadowed the latest Case-Shiller Home Price Index report released this week showing Dallas-area home prices growing at the slowest pace in five years.
To quote an experienced homeowner who has been through ups and downs in the Los Angeles market, “First-time homebuyers, like I was when I bought my first house, tend to be most optimistic or probably even naïve in my case. I could not imagine any downside, I just wanted to own and buy at all cost. Experienced buyers are more aware of the cyclical nature of the market and are more realistic and cautious. After all, if you have owned enough homes like I have, you likely have been burned once or twice, and know what it’s like to have buyer’s remorse.”