ValueInsured Modern Homebuyer Survey, Wave 9, Q2 2018

Conducted April 2018
Nationally representative sample of 1,002 U.S. adults (reflective of U.S. Census)
Cumulative sample of 10,600+ U.S homeowners and homebuyers since Spring 2016
Margin of error for Wave 9 is +/- 2.6%
By independent research and analytics firm Equation Research

ValueInsured Housing Confidence Index

This Index composites seven attitudinal dimensions directly related to home-buying and housing health sentiments – beyond general consumer confidence – to obtain an accurate measurement of Americans’ latest housing confidence.

Seven Housing Confidence Index markers:

  • Confidence in the health of the American housing market
  • Confidence in the health of your local area housing market
  • Confidence in buying a home in America today as a good investment
  • Confidence in buying a home in your neighborhood as a good investment
  • Confidence in buying a home as more financially beneficial than renting
  • Confidence in buying a home in America today as a secure and smart financial investment
  • Confidence in buying a home as the best financial decision I can make for my family and for me

ValueInsured Housing Confidence Index

Shifts from Q4 2017 to Q1 2018 to Q2 2018 (out of a 100-point scale):                                  

Segment

Total Americans:

Homeowners:

Non-homeowners:

All Millennials:

Millennial homeowners:

Millennial non-homeowners
(first-time homebuyers):

Q4 2017

67.7

75.3

60.3

65.3

77.7

57.3

Q1 2018

66.9

74.3

60.4

66.7

76.1

59.1

Q2 2018

62.0 (-4.9)

69.3 (-5.0)

54.7 (-5.7)

58.6 (-8.1)

69.4 (-6.7)

53.1 (-6.0)

 

Key Findings

Housing confidence bottoms out; high home prices, unaffordability post stress on Americans, including homeowners

This is a survey of many lowest levels recorded…

 

  • ValueInsured Housing Confidence Index drops to lowest levels for all key demographic segments since the inception of the quarterly survey in Q1 2016
    • For the first time, homeowners’ housing confidence dropped below the 70’s, currently at 69.3 (historically at mid to high 70’s)
    • Non homeowners’ housing confidence dropped to low 50’s for the first time, currently at 54.7, after lingering in the low 60’s for nearly 2 years amid historically low mortgage rates post-Brexit
    • Millennial homeowners, who have consistently reported the highest levels of housing confidence among key segments, reported housing confidence below 70% for the first time, currently at 69.4, after lingering in the mid-80’s level in 2016 during and post-Brexit.
    • After a period of increased housing optimism last year amid still-low interest rates and bullish jobs reports, millennial non-homeowners’ housing confidence reversed course this quarter, currently at 53.1.
    • Female millennial non-homeowners now represent the least confident segment in America regarding our housing market, with a current confidence index score of 52.9%. 

 

  • What’s perhaps surprising is that homeowners, including all homeowner demographic sub-segments, reported declines in housing confidence, even as home prices continue to rise. This could be connected to homeowners’ feeling of being stuck, their lack of control to make housing decisions at their own time and on their own terms, and their own concern for affordability, as detailed below.

 

  • As home prices and rates rise, Americans are losing confidence in home buying as a “secure and smart investment”. Confidence in health of the housing market also eroded:
    • 50% Americans now believe the housing market is healthy, down from the peak of 62% in Q3 2016 post-Brexit and from 60% a year prior. Among them, 67% of homeowners now believe the housing market is healthy, down from 77% a year prior. Over 3 in 10 homeowners and 2 in 3 non-homeowners (67%) now believe the American housing market is “unhealthy”.
    • 77% homeowners and 52% non-homeowners now consider buying a home a “secure and smart investment”, again at the lowest levels recorded for both groups. In other words, over 2 in 10 Americans who actually own a home do not consider home buying now to be a secure and smart investment.
    • It’s worth noting that the desire to own a home has remained consistent since inception of the survey; currently 79% of all non-homeowners say they want to own a home. However, the association of home buying as a secure investment has declined.
    • Only 50% of all Americans (63% homeowners and 37% non-homeowners) believe now is a good time to buy a home. These are all lowest levels recorded for the measure since inception of the quarterly survey, and down from 60% for all Americans, 76% for homeowners, and 45% for non-homeowners in the last quarter (Q1 2018).

 

  • Despite high home prices, not all homeowners consider themselves winners in this market. 61% of all homeowners believe the housing market is heading to a good direction “for people like me”. This is down from 69% in Q1 and from 78% in post-Brexit high.
    • 34% non-homeowners believe the housing market is heading to a good direction “for people like me”, down from 36% in Q1.
    • 30% millennial first-time homebuyers believe the same, down from 40% in Q1.

 

  • ·Declining housing confidence coincides with declining perception of affordability among not only non-homeowners who wish to buy, but also among current homeowners. Confidence to afford a home fell to the lowest levels since inception of this survey for both segments:
    • Now, 32% of all non-homeowners (down from 45% from a year prior) who would like to buy a home in the near future and 74% of all homeowners (down from 81% from a year prior) who would like to sell and buy another home in the near future are confident they could afford to buy a home they would like to live in. In other words, 1 in 4 homeowners who would like to sell and move do not believe they could afford it.

 

  • And even among those who believe they could afford to buy a home, AND want to become homeowners, there is rising doubt that further price growth is sustainable:
    • Among millennial first-time homebuyers, only 42% believe a home they buy today would be worth more by end of 2019. This is a sharp decline from 59% who believed the same in 2016 and the lowest level recorded in our survey.
    • 68% of all Americans believe a housing correction will happen within 2 years.
    • Interestingly, homeowners are more pessimistic about the prospect and imminence of a housing correction, with 71% believe a correction will happen within 2 years, and 32% who believe it will happen without 12 months.
    • Homeowners in CA and TX are most pessimistic about current market sustainability, with 79% of CA homeowners and 80% of TX saying home price correction will happen within 2 years. In Texas, 44% of all homeowners surveyed believe a home price correction is already under way in their local area or will happen within 12 months.

 

  • Consistent with above findings, homeowners in particular are concerned about buying high
    • Among homeowners who wish to sell their current home and buy another home, 66% say they are hesitating because they do not want to “buy high”.
    • 60% of all homeowners believe people who buy in their neighborhood now are overpaying
    • 80% millennial homeowners who wish to trade up say they believe if they were to do so now, they would be “buying high”.
    • 68% are waiting until prices to buy are better to make a move
    • These is strong and consistent evidence suggesting that homeowners who have “been there, done that” appear more in tune with the cyclical nature of the housing market; this may explain why so many are staying on the sidelines, and keeping home inventory low, especially among starter-homeowners who are most reluctant to buy another home.

 

  • Over 6 in 10 Americans (62%), including homeowners, now believe people who buy now could regret the decision:
    • 38% believe people who buy today will have “buyers’ remorse” due to high home prices.
    • An additional 24% went as far as saying people will experience similar buyer’s remorse felt by those who bought right before the 2008 housing crisis felt.

 

  • Housing confidence erosion among Americans is likely driven by more than rising home prices. Since the Fed’s gradual actions to raise benchmark interest rates in December 2016, first-time homebuyers for the first time in the latest survey reported a rise in sentiment that more rates hikes should be expected. In other words, first-time buyers have exhibited indifference or lack of knowledge about rate hikes until now, but the milestone of reaching 4.5% for 30-year fixed rate seems to have been a tipping point and a wake up call.
    • 56% Americans believe rising mortgage rates will have a negative effect on home-buying demand and home prices
    • 76% believe mortgage rates will continue to rise
    • 59% believe 30-year fixed mortgage rate will rise above 5% by 2019; among those, 13% believe rate will reach or cross the 6% mark by the end of 2019.