Fewer Renters Think It Is A Good Time To Buy A Home

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The Editors's picture
Few renters think it is a good time to buy a home

A new survey shows fewer renters think it is a good time to buy a home and they are not optimistic about the economy and their personal financial situation, according to a release.

The National Association of Realtors (NAR) released the new quarterly Housing Opportunities and Market Experience survey showing how the morale of renters about buying a home has declined.

 "Paying more in rent each year and seeing home prices outpace their incomes is discouraging, and it's unfortunately pushing home ownership further away — especially for those living in expensive metro areas on the East and West Coast,"  Lawrence Yun, NAR chief economist, said in the release.

Confidence among renters that now is a good time to buy a home continues to retreat

  • Fifty-two percent of renters think now is a good time to buy, which is down both from last quarter (56 percent) and a year ago (62 percent)
  •  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 be short lived, according to the survey.

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 not have as strong feelings about their financial situation. The HOME survey's monthly Personal Financial Outlook Index  showing 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)," said Yun.

Low housing turnover at the root of supply and affordability problems

The survey also showed 71 percent of homeowners believe it is a good time to sell. But whether they plan to list their home for sale is another question.

 This quarter, 71 percent of homeowners think now is 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 this quarter to be the most likely to think now is a good time to sell.

There is an apparent mismatch between homeowners' confidence in selling and actually following through and listing their home for sale.

 "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 said in the release.  "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. Low housing turnover is one of the roots of the ongoing supply and affordability problems plaguing many markets," he said.

Under half of respondents believe homes are affordable for most buyers; one in five 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 not surprisingly — 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," said Yun.

See the full report here.

About NAR's HOME survey

In April through early June, a sample of U.S. households was surveyed via random-digit dial, including a mix of cell phones and land lines. The survey was conducted by an established survey research firm, TechnoMetrica Market Intelligence. Each month approximately 900 qualified households responded to the survey. The data was compiled for this report and a total of 2,711 household responses are represented.The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

 

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