Survey: Consumer Perception of U.S. Housing Gains Ground

Current and prospective homeowners remain optimistic about the current state of the U.S. real estate market, according to a survey by Berkshire Hathaway HomeServices, Irvine, Calif.

Respondents to the company’s quarterly Homeowner Sentiment Survey cite higher home values, increasing housing inventory and low interest rates as the main reasons for their optimism.

The survey reported 66% of existing homeowners view the U.S. real estate market favorably, a 5 percentage point jump since spring to the highest level in more than a year. Favorability also grew most among baby boomers, who to date had been the most pessimistic group tracked. The current survey said 60% of boomers view the housing market favorably, a 6 point increase since spring. They overwhelmingly (72%) point to interest rates as the primary reason for their optimism.

Gino Blefari, CEO of Berkshire Hathaway HomeServices, said this is important, given the current state of the market. “As homeowners feel increasingly confident about the outlook of housing and their homeownership investments, they are more likely to consider a move for themselves–up, down or laterally to another market,” he said. “Perhaps this is a signal that more existing homes may gradually come to market freeing up more options for first-time and move-up buyers.”

Among all respondents, millennials appear to be most optimistic about the real estate market and are the most satisfied with the U.S. economy. The survey said 76% of respondents ages 18-34 view housing favorably, up one point from last spring and 17 percentage points from November. A large majority of millennials (85%) also believe that owning a home is an important part of the “American Dream,” a sentiment shared with older generations.

And in an era of sustained low mortgage rates, millennials think “low” mortgage rates is subject to interpretation. Just 13% of millennial respondents described loan rates as “low” while 53% categorized them as “average.” Additionally, millennials indicated that their biggest challenge in purchasing a home is securing a low mortgage rate. Gen-Xers said their largest barrier to homeownership is saving money for the purchase, while boomers said their biggest challenge is “finding a home that suits their family’s wants and needs.”

The possibility of rising mortgage rates remains a concern among all demographic groups surveyed. Eighty-one percent of prospective homebuyers expressed concern about rate increases.

“Mortgage rates have been low for so long it’s only reasonable for rates to rise a little at some point down the road,” said Stephen Phillips, president of Berkshire Hathaway HomeServices. “If and when rates do rise, it’s also reasonable to expect only a gradual increase over time–no rate shock.”

The survey also reported among renters, many said they’ve been renting homes for longer periods than originally planned. Those renting for a year to three years said their largest challenge is saving money for a down payment. Prospective homeowners renting from three to five years said their primary hurdles include finding a suitable home, trying to save money and getting a good interest rate on a loan. Those renting for six years or more expressed more concern about the U.S. economy.

Besides saving for a down payment, 37% of millennial renters indicated they are interested in buying only when they’re ready to afford their dream home, signaling that they find the concept of a “starter home” less desirable than previous generations. Renters who said they could not buy a home listed poor credit scores and strict lender guidelines as their principal hurdles.