Existing housing inventory has declined year over year each month for two straight years, but new consumer findings from the National Association of Realtors (NAR) offer hope that the growing number of homeowners who think now is a good time to sell will eventually lead to more listings, according to NAR’s quarterly Housing Opportunities and Market Experience (HOME) survey.
In addition, the survey finds that fewer renters think it’s a good time to buy a home, and respondents are less confident about the economy and their financial situations than earlier this year despite continuous job gains.
The HOME survey shows an increased share of homeowners who believe now is a good time to sell their homes. This quarter, 71% of homeowners think now is a good time to sell – up from last quarter (69%) and considerably more than a year ago (61%). Respondents in the Midwest (76%) surpassed the West (72%) for the first time this quarter to be the most likely to think now is a good time to sell.
Lawrence Yun, chief economist for NAR, says there’s a mismatch between homeowners’ confidence in selling and actually following through and listing their homes for sale: “There are just not enough homeowners deciding to sell because they’re either content where they are, holding off until they build more equity, or hesitant, seeing as it will be difficult to find an affordable home to buy,” he says.
“As a result, inventory conditions have worsened and are restricting sales from breaking out while contributing to price appreciation that remains far above income growth.
“Perhaps this notable uptick in seller confidence will translate to more added inventory later this year. Low housing turnover is one of the roots of the ongoing supply and affordability problems plaguing many markets,” Yun adds.
However, confidence among renters that now is a good time to buy a home continues to retreat. Fifty-two percent of renters think now is a good time to buy – down both from last quarter (56%) and from a year ago (62%). Conversely, 80% of homeowners (unchanged from last quarter and a year ago) think now is a good time to make a home purchase. Younger households and those living in urban areas and in the costlier West region are the least optimistic.
The surge in economic optimism seen in the first quarter of the year appears to be short-lived. The share of households believing the economy is improving fell to 54% in the second quarter after soaring to a survey high of 62% last quarter. Homeowners, and those living in the Midwest and in rural and suburban areas, are the most optimistic about the economy. Only 42% of urban respondents believe the economy is improving, which is a drastic decrease from the 58% a year ago.
Dimming confidence about the economy’s direction is also leading to households not having strong feelings about their financial situations. The HOME survey’s monthly Personal Financial Outlook Index showed respondents’ confidence that their financial situations will be better in six months fell to 57.2 in June after jumping in March to its highest reading in the survey. A year ago, the index was at 57.7.
“It should come as little surprise that the confidence reading among renters has fallen every month since January (64.8) and currently sits at its lowest level (53.8) since tracking began in March 2015 (65.7),” Yun says. “Paying more in rent each year and seeing home prices outpace their incomes is discouraging, and it’s unfortunately pushing homeownership further away, especially for those living in expensive metro areas on the East and West Coast.”
In this quarter’s survey, respondents were also asked about the affordability of homes in their communities. Overall, only 42% of respondents believe they are affordable for almost all buyers, with those living in the Midwest being the most likely to believe homes are affordable (55%) and, not surprisingly, West respondents (29 percent) being the least likely to think homes are affordable.
Additionally, 20% of respondents would consider moving to another more affordable community. Those earning under $50,000 annually (27%) and those age 34 and under (29%) were the most likely to indicate they would consider moving.
“Areas with strong job markets but high home prices risk a migration of middle-class households to other parts of the country if rising housing costs in those areas are not contained through a significant ramp-up in new home construction,” Yun adds.