NAR says US Housing cools at year’s end
According to NAR’s fourth quarter Housing Opportunities and Market Experience Survey (HOME survey), despite steady job creation, record stock market gains and faster economic growth in recent months, new consumer findings surprisingly show that a smaller share of households believe that now is a good time to buy or sell a home. NAR’s HOME survey also found that U.S. households are also less confident about the economy and their financial situation.
With 2017 coming to a close, optimism among renters about buying a home appears to be slightly softening. After rising to 62 percent last quarter, the share of renters who believe now is a good time to buy dipped to 60 percent (57 percent a year ago). Overall, among the most optimistic about buying are current homeowners (79 percent; 80 percent last quarter), households with incomes above $100,000 and those living in the more affordable Midwest and South regions.
NAR Chief Economist Lawrence Yun says this fall’s pitiful supply levels and weaker affordability conditions are likely casting doubt that now is a good time to buy. “The trifecta of faster economic expansion, robust hiring and low mortgage rates should be generating a surge in optimism and home sales as 2017 winds down,” he said. “Sadly, this is not the case. While overall demand remains high, it is not translating to meaningful sales gains. Too many prospective first-time buyers see few options within their budget and home prices that are rising much faster than their incomes.”
Added Yun, “Until we start seeing a steady increase in new and existing inventory, sales will fail to deliver on their full potential and many would-be first-time buyers will be forced to continue renting.”
Despite highly favorable sellers’ markets across the country, the share of homeowners who believe now is a good time to sell a home decreased this quarter to 76 percent (80 percent last quarter); although it still remains much higher than a year ago (62 percent). Similar to previous quarters, households in the West continue to be the most optimistic about selling a home and the least optimistic about buying.
“The good news for possible inventory gains heading into 2018 is the fact that a much larger share of homeowners compared to a year ago think it’s a good time to sell,” added Yun. “However, the decline in the latest quarter is worth monitoring. Realtors say the lack of new home construction in their markets is giving many potential trade-up buyers hesitation about putting their home on the market out of fear they won’t find another property to buy. This indecisiveness only exacerbates tight inventory conditions and slows housing turnover.”
Even with the economy expanding above 3 percent the last two quarters, as well as another year of solid job gains, fewer households in the final quarter of 2017 (52 percent) believe the economy is improving compared to the third quarter (57 percent) and a year ago (54 percent). For the fourth straight quarter, economic optimism from respondents living in rural and suburban areas outpaced those residing in urban areas.
Slightly lower economic confidence this quarter also led to households having slightly diminished 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 from 62.0 in September to 59.1 in December. A year ago, the index was 59.8.