Survey Suggests Consumer Housing Confidence Ebbs

Two surveys from ValueInsured, Dallas, suggest homeowners–and Millennials in particular–feel less enthused about the housing market.

The ValueInsured Housing Confidence Index for Millennials registered at 56.9 on a 100-point scale in the third quarter, marking a survey low, down 1.7 points from the second quarter and down 10.1 points from a year ago.

The survey reported 48 percent of all Millennials believe buying a home in America today is a good investment, a record low, down from 54 percent in the second quarter. The previous high was 77 percent two years ago. Fifty-eight percent of Millennials said buying a home is the best financial decision they can make for themselves and their family, another survey low in 10 quarters.

Additionally, the survey found just over six in 10 Millennials (61 percent) now believe buying a home is more beneficial than renting, again a survey low, down from a high of 83 percent two years ago. While 76 percent of all homeowners believe now is a good time to sell a home, only 39 percent of Millennials who want to become homeowners believe now is a good time to buy a home.

Just as importantly, said ValueInsured CEO and Founder Joe Melendez, in addition to reporting a steady slide in their conviction for home buying, more millennials now associate owning with sacrifices. Nearly one in four (23 percent) believe they need to delay having children in order to afford buying a home; and 32 percent do not believe they can afford a healthy and balanced diet while saving for a home at today’s high prices. Thirty-one percent seriously consider relocating to another city to afford buying

“Conventional wisdom assumed Millennials were buying homes later because they chose to get married and have children later,” Melendez said. “Homeownership may be the cause, not the effect, of delayed family formation. It is an alarming trend, and we see more acute evidence in expensive housing regions.”

The survey said among millennials who are still interested and motived to become homeowners “in the near future,” their anticipation is often filled with anxiety. Among motivated first-time buyers, 49 percent are concerned rising mortgage rates could make homes currently within their budget become unaffordable later; 67 percent are concerned they will not save enough for a home they would actually like to live in; and 52 percent believe a home they buy now will likely drop in value within one year. Sixty-eight percent are concerned about another housing crisis; and 64 percent admit they will likely experience buyer’s remorse after reaching their homeownership goal.

“Most homebuyers experience a healthy amount of jitters before such a milestone purchase – that’s normal,” Melendez said. “But the new normal is highly anxious, inexperienced buyers bungee-jumping in without knowing if their safety harnesses will work. That is an unhealthy, bordering on dysfunctional trend that our industry needs to mitigate to ensure we do not lose an entire generation of future homeowners.”

Separately, the ValueInsured Modern Homebuyer Survey conducted this summer found 65% of all American homeowners believe the housing market is near its current cycle peak and 63% believe there will be a price correction in their area within two years, the highest levels recorded for both measures since the survey’s inception in 2016.

Key survey findings:

–54% believe rising mortgage rates would eventually stunt the housing market and trigger lower home value in their neighborhood

–33% believe new tax laws that could decrease potential tax credits for homeowners and make homeownership more expensive would trigger lower prices

–16% believe a home price correction in their neighborhood will follow the next stock market correction

–11% believe intensifying trade wars will be the catalyst that erode their local home value

The Mortgage Bankers Association projects the 30-year fixed mortgage rate to reach 4.8% by the end of 2018 and 5.2% by the end of 2019.

The survey found among millennials who are highly interested in buying their first home “in the near future,” 44% believe new tax laws for homeowners would drive down home value. The higher propensity of millennial homebuyers’ concern for new tax laws could be explained by the higher concentration of millennials in coastal housing markets, which are predicted to be most affected by the new tax laws, and where the effects of new taxes have received more negative local media attention.

In California, 44% of all homeowners believe new tax laws will trigger a decline in home prices in their area. In Connecticut and New Jersey, the percentages for the same measure are a staggering 49% and 58% respectively. In Washington, 63% of all homeowners believe rising mortgage rates will trigger lower buying demand and a home value correction.