Confidence in the market is waning among would-be homebuyers, but at the same time, consumer enthusiasm for personal financial situation and country’s economic direction, according to the Housing Opportunities and Market Experience (HOME) survey [1] for the fourth quarter from NAR.
Approximately 78 percent of those surveyed in Q4 said now is a good time to buy a home, compared with 82 percent in the fourth quarter a year ago, according to NAR. A sharp decline in confidence was experienced among renters, with 57 percent in Q4 believing now is a good time to buy compared with 68 percent in Q4 2015.
“Rents and home prices outpacing incomes and scant supply in the affordable price range has been a prominent headwind for many prospective buyers this year,” he said. “Making matters worse, the unwelcoming reality of higher mortgage rates since the election is likely further holding back confidence. Younger households, renters and those living in the costlier West region—where prices have soared in recent months—are the least optimistic about buying.”
Even with the headwinds facing buyers, existing-home sales sold at an annual pace of 5.42 million in 2016, the best year for existing-home sales since they sold at an annual clip of 6.47 million in 2006. Yun said the pace of existing-home sales is expected to bump up slightly in 2017 to 5.52 million while the median home price continues its upward climb (forecasted to rise by approximately 4 percent), and ditto for mortgage rates (up to approximately 4.6 percent by the end of 2017)
“Although the economy is expected to continue to expand with around 2 million net new job creations, existing home sales are expected to see little expansion next year because of affordability tensions from rising mortgage rates and prices continuing to outpace income growth,” said Yun.
Despite fewer prospective buyers expressing confidence in the market, the survey showed that more consumers in Q4 expect the nation’s economy to improve under the new administration. However (54 percent, compared with 48 percent in Q3), with consumers under 44 living in urban areas with higher incomes expressing the most enthusiasm for the economy next year. The share of consumers who believe their personal financial situation will get better in the next six months rose from 58.6 in Q3 up to 59.8 in Q4, according to NAR.
Yun said he is hoping the optimism for the economy along with job gains and more millennials reaching the prime home buying age will fuel growth in housing next year.
“Some would-be sellers may be reluctant to move up or trade down—especially if they've refinanced in recent years,” said Yun. “That's why it's extremely necessary for homebuilders to step-up their production of homes catered to buyers in the affordable price range. Otherwise the nation's low homeownership rate will struggle to shift higher in 2017.”
Click here [1] to view the complete survey.