Homeowners, especially millennials looking to upgrade from their current homes, are increasingly losing confidence in the affordability of the housing market according to the latest quarterly Modern Homebuyer Survey by ValueInsured [1].
The survey’s [2] housing confidence index dropped 4.9 points to 62 from the first quarter of 2018 with homeowners and buyers reporting a sizeable drop in confidence. The survey revealed that while homeowner confidence dropped five points to 69.3, non-homeowners reported a 5.7 points drop in confidence to 54.7. Among all homeowners, millennials reported the largest drop in confidence, the survey indicated.
While the desire to own a home remains high, the survey found that 67 percent of the respondents believed that the American housing market was unhealthy. The number of respondents who believed that buying a home was a secure and smart investment dropped to 52 percent during the quarter.
“This is a pivotal time with rising prices and rates weighing heavily on consumers,” said Joe Melendez, CEO, and Founder of ValueInsured. “Flat to declining home sales volume indicates sellers and buyers are not exactly jumping in with both feet. More of them could be moved off the sidelines if perceived security and confidence in home buying could be restored.”
Affordability was the topmost concern among homeowners and buyers. The survey found that confidence in being able to afford a home had dropped 11 points for homeowners wanting to sell and then upgrade to a new home. For first-time homebuyers, confidence in their ability to afford a home fell 13 points. While 59 percent believed that the 30-year fixed-rate mortgage would reach 5 percent by 2019, only 42 percent of millennial first-time homebuyers believed that a home they bought now would be worth more by the end of 2019.
“Housing confidence–as do home prices–goes up and down, but what’s noteworthy now is the decline among homeowners, in particular millennials,” Melendez noted. “Many are stuck in homes they have outgrown and cannot upgrade, which explains the inventory shortage we see at the starter-home level.”
The survey found that optimism among potential home sellers was also declining with 61 percent homeowners saying that the housing market was heading in a good direction, down from 78 percent in the last quarter.