Real Estate

Homebuyers becoming dispirited even as economic confidence grows

But homeowners warm to the idea of selling

Americans are growing increasingly confident in the economy and their financial situation, however this is not translating into a more positive view that now is a good time to buy a home, according to the National Association of Realtors’ first quarter Housing Opportunities and Market Experience survey.

Heading into the spring home buying season, about 68% of consumers said now is a good time to buy a home, the survey showed. This is down from 72% last quarter, and is the lowest point in the past two years.

This optimism is even lower among renters, where 55% say now is a good time to buy a home, down from 60% last quarter. Homeowners, older respondents and those living in the more affordable regions of the Midwest and South held a more positive outlook.

“The critical shortage of listings in most markets continues to spark a hike in home prices that is not easy for many buyers – and especially first-time buyers – to overcome,” NAR Chief Economist Lawrence Yun said. “Adding more fuel to the affordability fire is the fact that mortgage rates have shot up to a four-year high in just a few months. Many house hunters are telling Realtors that they are dispirited by the stiff competition for the short number of listings they can afford.”

And now experts are saying this competition and rising home prices are only going to get worse as the spring home buying season kicks into full gear.

There is, however, a light at the end of the tunnel. An increased share of homeowners now believe now is a good time to sell their home. The share of homeowners saying now is a good time to sell increased from 71% last quarter to 74% in the first quarter. This is second to the third quarter last year’s all-time high of 75%.

“There’s no question that a majority of homeowners have amassed considerable equity gains since the downturn,” Yun said. “Home prices have grown a cumulative 48% since 2011 and are up 5.9% through the first two months of this year.”

“Supply conditions would improve measurably, and ultimately lead to more sales, if a growing number of homeowners finally decide that this spring is the time to list their home for sale,” he said.

More households said they believe the economy is improving compared to the fourth quarter of 2017 with a share of 60% versus 52% last quarter. Economic optimism was down slightly from the first quarter last year, when it hit 62%.

“The jump in optimism to start the year can be attributed to the robust job creation in most of the country, as well as the larger paychecks households are enjoying because of faster wage growth and the recent tax cuts,” Yun said. “These three positives should further ignite buyer demand.”

“However, several metro areas with the healthiest labor markets also have the most severe supply and affordability pressures,” he said. “This troublesome reality is what’s dampening moods and keeping many would-be buyers at bay.”

Along with the heavy competition, saving up for a down payment is also one of the barriers preventing non-homeowners from buying a home. Non-homeowners responded that some things keeping them from saving up for a down payment include 47% saying limited income, 30% saying student loan debt, 28% saying rising rents and 14% saying health and medical costs.

“It’s never too early for those wanting to own a home in the future to sit down with a lender to discuss their current financial situation,” NAR President Elizabeth Mendenhall said. “Homeownership could be a more attainable goal once an interested buyer finds out how much they can afford to buy, as well as what steps, if any, are needed to improve their chances of obtaining a mortgage.”

In fact, the latest real house price index from First American Finance Corp., which measures affordability by comparing home prices with the rate of inflation and the current interest rates, found that it is actually historically affordable to buy a home. The index showed while home prices are increasing, “real house prices,” or its affordability measure, are down a full 35.8% from the housing boom peak and 13.8% from the January 2000 price levels.

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