Survey shows economic confidence, homebuying hopes on divergent paths during first quarter
WASHINGTON — New consumer findings from the National Association of Realtors show that while a growing share of households in the first three months of the year feel more confident about the economy and their financial situation, those positive feelings are not translating to positive views that now is a good time to buy a home.
That’s according to the NAR’s firstquarter Housing Opportunities and Market Experience (HOME) survey, which also found that homeowners are increasingly positive about selling, and that nonhomeowners have anxiety about saving for a down payment and qualifying for a mortgage.
Heading into the busy spring buying season, optimism that now is a good time to buy a home is at its lowest share in the past two years (68 percent; 72 percent last quarter). Among renters, feelings about buying are further diminished (55 percent; 60 percent last quarter). Conversely, those most optimistic about buying are homeowners, older respondents and those living in the more affordable Midwest and South regions.
Lawrence Yun, chief economist for the NAR, said that extremely challenging market conditions at the start of the year are chipping away at homebuyers’ optimism.
“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,” 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,” he said. “Many house hunters are telling Realtors that they are dispirited by the stiff competition for the short number of listings they can afford.”
Amid the ongoing climb in home prices in most markets, the share of homeowners who believe now is a good time to sell increased to 74 percent in the first quarter (71 percent last quarter), which is second only to last year’s third quarter (75 percent) as the highest overall share since the HOME survey began in December 2015. A year ago, 69 percent of homeowners thought it was a good time to sell.
“There’s no question that a majority of homeowners have amassed considerable equity gains since the downturn. Home prices have grown a cumulative 48 percent since 2011 and are up 5.9 percent through the first two months of this year,” Yun said. “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 homes for sale.”
• Consumers feeling more upbeat about the economy and their financial situation
Although optimism was a tad higher a year ago (62 percent), more households in the first quarter of this year (60 percent) believe the economy is improving, compared to the fourth quarter of 2017 (52 percent). Homeowners, residents from the South and those from rural areas were the most optimistic about the direction of the economy.
Stronger economic confidence this quarter also led to households having improved feelings about their financial situation. The HOME survey’s monthly Personal Financial Outlook Index, showing respondents’ confidence that their financial situation will be better in six months, rose from 59.1 in December to 63.8 in March. A year ago, the index was slightly lower (62.6).
“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,” he said. “However, several metro areas with the healthiest labor markets also have the most severe supply and affordability pressures. This troublesome reality is what’s dampening moods and keeping many would-be buyers at bay.”
• Income, debt and anxiety hold back some nonhomeowners from buying
In this quarter’s survey, nonhomeowners were also asked about the barriers preventing them from saving for a down payment. Limited income (47 percent), student-loan debt (30 percent) and rising rents (28 percent) were the top three obstacles cited, followed by health and medical costs (14 percent). Only 14 percent also said that nothing was holding them back from saving for a down payment.
Nonhomeowners were also asked for the potential reasons why qualifying for a mortgage would be difficult. Income uncertainty (45 percent), a low credit score (34 percent) and too much debt (26 percent) were mentioned the most. Twenty-nine percent said they lacked the financial knowledge or did not know the first step needed to qualify.
“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,” said NAR President Elizabeth Mendenhall, a sixth-generation Realtor from Columbia, Missouri and CEO of RE/MAX Boone Realty.
“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,” she said.
ABOUT THE SURVEY
From January through early March, a sampling of U.S. households was surveyed via random-digit dial, including a mix of cellphones and landlines. The survey was conducted by TechnoMetrica Market Intelligence. Each month, approximately 900 qualified households responded to the survey. The data was compiled for this report, and a total of 2,702 household responses are represented.