As we all know, the market is psychological. How consumers feel about the market affects how they ultimately behave in it.
In the latest ValueInsured Modern Homebuyer Survey, Americans were asked how they fare in this current housing market.
2017 has been called the most competitive home-buying season ever and the strongest seller's market ever. However, recent reports tell a different story. In San Diego, 20% of all listed homes had a price cut in June. In Seattle, where bidding wars had become the norm in the past three years, market watchers are starting to see 6-figure price drops for median-price homes. In Dallas, 19% of all listed homes had seen their prices cut at least once in June. These are previously unheard off in recent years. Homeowners, who are typically more informed and aware of the latest market conditions in their neighborhood compared to new homebuyers, appear to have taken note according to the latest ValueInsured Modern Homebuyer Survey.
In the latest ValueInsured Modern Homebuyer Survey conducted in Summer 2018, 65% of all American homeowners believe the housing market is near its current cycle peak and 63% believe there will be a price correction in their area within two years – the highest levels recorded for both measures since the inception of the quarterly national survey in Spring 2016.
Given that similar correction concerns have been reported recently by The Washington Post, CNBC, Bloomberg, and Forbes, among many others, this declining homeowner confidence in home value sustainability is not news. What has not been examined more closely, however, are the potential catalysts for the pending correction.
In ValueInsured’s latest Modern Homebuyer Survey, millennial homeowners reported concerns for housing overvaluation, and rising pessimism for home price futures. One would expect millennial homeowners – being in the enviable position of owning in this seller’s market – to rejoice at rising home prices, but their reported sentiments tell an opposite story. Any rise in their home equity wealth on paper is negated by their concern for a pending correction, and the worries that they could be “buying high” if they were to upgrade now. The result? inventory shortage particularly for starter homes.
“The first one I saw and I knew it was the one…” may be a line you would hear in a movie, but it is unlikely how a homeowner would describe his or her home buying experience, and certainly not in 2018.
In this competitive housing market where homebuyers are accustomed to compromises and disappointments, most buyers need to tour over a half dozen homes – often after viewing many more online – before finding the right one, according to latest findings in ValueInsured’s Q2 2018 Modern Homebuyer Survey.
We know this is true: Americans have a strong desire to become homeowners (79% among non-homeowners, according to the latest ValueInsured Modern Homebuyer Survey) and the next generation continues to view homeownership as an important part of their American Dream (78% among millennials). However, increasing evidence shows they may not enjoy the process of actually buying a home.
After months of upward trends, home mortgage rates have retreated somewhat and are currently at an average of 4.39 percent for a 30-year fixed loan, lower than levels in June. However, after two benchmark rate hikes already this year, two more are signaled by the Federal Reserve and are expected by top analysts for 2018, meaning current mortgage rates most likely could increase again.
In ValueInsured’s latest Modern Homebuyer Survey, over 3 in 4 Americans (76%) believe mortgage interest rates will continue to go up in 2018. Nearly 6 in 10 (59%) predict an average 30-year fixed rate will reach 5% by the beginning of 2019, and 13% Americans expect to see 6% 30-year mortgages by the end of 2019.
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.