Homeowner Confidence High, But Buyers ‘Discouraged’ by Housing Market

Homeowners may be ready to put their house on the market, but who may line up to buy it remains in question.

While homeowners feel increasingly confident that now is a good time to sell their home, many renters and current owners feel uncertain about their ability to afford to buy, said Zillow Inc., Seattle.

The company’s semi-annual Housing Confidence Index inched up to 67.3, up nearly half a point from January. But the imbalance between selling and buying is causing some key markets to slow.

The survey said confidence among homeowners is on the rise, with the most confident homeowners concentrated in Western and Southwestern cities. Out of every 10 homeowners surveyed, seven said now is a good time to sell a home.

But less than 65 percent of homeowners surveyed said now is a good time to buy, reflecting a decline over the past two years. Just 38 percent of renters surveyed said now is a good time to buy a home; nearly 50 percent of renters in San Francisco and New York expressed a lack of confidence in their ability to afford a home in the future, with half of renters surveyed in Seattle, San Jose and Boston expressing similar feelings.

Zillow Chief Economist Svenja Gudell said home values are at or past peak levels in roughly a quarter of U.S. markets, signaling a recovery since the housing bubble bust, but a growing divide between renter and homeowner sentiments persists, highlighting two very different trends in the housing market right now.

“The overall health of the housing market looks great at first glance, but dig a bit deeper you’ll find inequality between renters and homeowners,” Gudell said. “Even though the majority of homeowners are confident and believe now is a good time to sell, they’re holding off because they expect home values to continue to appreciate and want to ride the wave. They also don’t want to turn around and become buyers in a competitive market.”

On the flip side, Gudell said, renters aren’t nearly as confident as homeowners, discouraged by the shrinking number of homes for sale and rapidly rising prices. “As housing gets more and more expensive, these trends are not sustainable in the long-run, especially once mortgage rates start to rise,” she said.

The semi-annual survey, conducted by Pulsenomics LLC, asked 10,000 renters and homeowners about the condition of their local real estate market, their expectations for home value growth and affordability in the future and their views on homeownership.

The survey noted housing confidence among homeowners continues to exceed that of renters in each metro area surveyed. This gap is smallest in Miami and largest in Seattle, which has the highest year-over-year rent appreciation of the 35 largest U.S. metros and rapidly rising home values, up 11 percent over the past year.

“During the past two years, housing confidence has increased in all but two of the metro areas,” said Terry Loebs, founder of Pulsenomics LLC. “Rising home equity levels, healthy housing market expectations among millennials and resilient homeownership aspirations among minority groups have all been factors in the robust readings of overall U.S. housing confidence. However, within certain metro areas and market segments, key sentiment indicators have begun to fade.”