According to ValueInsured’s most recent Modern Homebuyer Survey, Americans’ desire to own a home is high (79%, among non-homeowners), but 67% of respondents believe the housing market is unhealthy.
In addition, the number of people who believe buying a home today is a secure and smart investment dropped to 52%.
Despite reports of a strong sellers’ market, the decline in confidence is significant across the board among homeowners and non-homeowners alike. The latest ValueInsured Housing Confidence Index registered at 62.0, a 4.9-point drop from Q1 2018. Both homeowners and non-homeowners reported sizeable drops in confidence, to 69.3 (-5.0) and 54.7 (-5.7), respectively. Millennial homeowners reported the largest decline among key segments, with a 6.7-point drop.
“Housing confidence – as do home prices – goes up and down, but what’s noteworthy now is the decline among homeowners; in particular, Millennials,” says Joe Melendez, CEO and founder of ValueInsured. “Many are stuck in homes they have outgrown and cannot upgrade, which explains the inventory shortage we see at the starter-home level.”
According to the survey, three key factors are affecting home buyers’ attitudes on housing:
- Confidence in the ability to afford a home has plummeted double digits for all groups since a post-Brexit high, with homeowners who want to sell and then buy reporting an 11-point drop. Affordability confidence for non-homeowners who want to buy fell 13 points during that same period to just 32 percent.
- Concern about rising interest rates, with 59% believing a 30-year fixed mortgage rate will reach 5% by 2019; 13% expect to see it at 6% by end of 2019; and
- Growing doubt that rising prices are sustainable, with only 42% of Millennial first-time home buyers – the largest segment of buyers – believing a home they buy now will be worth more by the end of 2019. Sixty-eight percent of all Americans surveyed believe a correction will happen within 24 months.
Despite high home prices, even potential sellers’ optimism is waning, with 61% of homeowners saying the housing market is heading in a good direction “for people like me.” This is down from a post-Brexit high of 78%. The survey also found that 63% of homeowners (including 59% of Millennial homeowners) and only 37% of non-homeowners consider now to be a good time to buy a home. These are all the lowest levels recorded in the quarterly survey’s history (previous nine quarters).
For people who are able to find a home in the current bidding-war, sight-unseen climate, buyer’s remorse is lurking. In fact, 62% of Americans surveyed say people who buy a home now will have buyer’s remorse. Among them, 24% believe 2018 home buyers could feel the same level of remorse as those who bought in the last peak before the 2008 housing crisis.
More details about the ValueInsured Modern Homebuyer Survey are available here.