First Time Homebuyers Face Slow Home Price Appreciation

As home prices increase at a much slower pace than they have been over the last few years, potential homebuyers may have found their opportunity to enter the housing market as homes become more affordable.

The Federal Housing Finance Agency's (FHFA) House Price Index (HPI) shows that home prices rose 5.8 percent year-over-year in the fourth quarter of 2015. Prices increased 1.4 percent from the third quarter of 2015, marking the 18 consecutive quarterly price increase in the purchase-only, seasonally adjusted index. Home prices were up 0.4 percent month-over-month for December.

“Instability in financial markets did not seem to put much of a drag on home prices in the fourth quarter,” said Andrew Leventis, FHFA Supervisory Economist. The 1.4 percent rise in home prices "was in line with the extremely steady—but historically elevated— appreciation rates we have been observing for several years now."

Fannie Mae’s Home Purchase Sentiment Index (HPSI) showed that consumers' home price expectations are the lowest they have been since late 2012, which could provide first-time homebuyers a chance to purchase a home in a calmer market. The index increased 1.2 points to 82.7 in February 2016, Fannie Mae reported.

“Our February results show the most modest consumer home price expectations since late 2012,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “For consumers who think it’s a bad time to buy a home, whose share has trended up from its recent low last November, high home prices have been an increasingly contributing factor. A slower pace of home price appreciation may provide some relief for potential homebuyers, especially first-time buyers who couldn’t reap the benefits of selling a home at high prices to buy another one.”

According to Fannie Mae, 33 percent of respondents said home prices will go up, up 4 percentage points. Meanwhile, those who say mortgage interest rates will go down rose 2 percentage points to negative 50 percent this month, as fewer consumers say mortgage rates will go up.

The report showed that the net share of respondents who say that it is a good time to buy a house increased 4 percentage points to 35 percent. This number bounced back from last month's survey low, with 63 percent of those surveyed saying now is a goof time to buy a house. In February, those who said now is a good time to sell a home decreased 2 percentage points to 7 percent.

The net share of respondents who say they are not concerned with losing their job rose 4 percentage points to 75 percent. A new all-time survey high was reached as 87 percent of respondents say they are not concerned about losing their job. The net share of respondents who say their household income is significantly higher than it was 12 months ago rose 3 percentage points to 15 percent.

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