WASHINGTON – June 28, 2017 – 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.
NAR's latest quarterly Housing Opportunities and Market Experience (HOME) survey also found that fewer renters think it's a good time to buy a home, however, and respondents are less confident about the economy and their financial situation than earlier this year despite continuous job gains.
The homeowner trend is gaining steam in the HOME survey, however. This quarter, 71 percent of homeowners think it's a good time to sell, which is up from last quarter (69 percent) and considerably more than a year ago (61 percent). Respondents in the Midwest (76 percent) surpassed the West (72 percent) for the first time to be the most likely to think now is a good time to sell.
There's an apparent mismatch between homeowners' confidence in selling and actually following through and listing their home for sale, says Lawrence Yun, NAR chief economist.
"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," Yun 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," Yun adds. "Low housing turnover is one of the roots of the ongoing supply and affordability problems plaguing many markets."
On the decline: Renter morale
Confidence among renters that now is a good time to buy a home continues to retreat. Fifty-two percent of renters think it's a good time to buy, which is down both from last quarter (56 percent) and a year ago (62 percent). Conversely, 80 percent 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 have been short lived. The share of households believing the economy is improving fell to 54 percent in the second quarter after soaring to a survey high of 62 percent last quarter. Homeowners, and those living in the Midwest and in rural and suburban areas, are the most optimistic about the economy. Only 42 percent of urban respondents believe the economy is improving, which is a drastic decrease from the 58 percent a year ago.
Dimming confidence about the economy's direction is also leading households to dampen previously strong feelings about their financial situation. The HOME survey's monthly Personal Financial Outlook Index on respondents' confidence that their financial situation 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 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)," says Yun. "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."
Fewer respondents believe homes are affordable; 1 in 5 would consider moving
In this quarter's survey, respondents were also asked about the affordability of homes in their communities. Overall, only 42 percent 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 percent) and West respondents (29 percent) being least likely to think homes are affordable.
Additionally, 20 percent of respondents would consider moving to another more affordable community. Those earning under $50,000 annually (27 percent) and those age 34 and under (29 percent) 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," says Yun.
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