SEATTLE – March 13, 2014 – If a Zillow survey crunched its numbers correctly, the real estate market will see a big upswing in buyer demand over the next year.
According to the inaugural edition of the Zillow Housing Confidence Index (ZHCI), more than 5 percent of all residents in 19 of the 20 large U.S. metro areas want to buy a home in the next year. When the survey focused on just current renters, the number rises to one in 10 (10 percent) hoping to buy a home in the next 12 months.
However, existing headwinds, including tight inventory, rising mortgage interest rates and growing affordability problems in a handful of areas, may make it difficult for many potential buyers to follow through. Still, the majority of respondents were “confident” or “somewhat confident” they could afford homeownership now.
If all renters hoping to buy jumped into the market, it would represent close to 4.2 million first-time home sales – more than double the roughly 2.1 million first-time homebuyers in 2013.
A lack of home inventory may halt some buyers’ aspirations, however. While inventory is up 11.1 percent nationally compared to a year ago, it’s still well below optimal levels. Recent Census Bureau data indicates that the share of new homes built as rental units has grown, while the share of new construction dedicated to single-family homes is down. Mortgage interest rates also continue to rise.
“Even after a wrenching housing recession, this data shows that the dream of homeownership remains very much alive and well, even in those areas that were hardest hit,” says Zillow Chief Economist Dr. Stan Humphries. “But these aspirations must also contend with the current reality, and in many areas, conditions remain difficult for buyers. The market is moving toward more balance between buyers and sellers, but it is a slow and uneven process.”
Pulsenomics created the Zillow Housing Confidence Index. Measured on a 0 to 100 scale, readings above 50 indicating positive sentiment. The overall ZHCI for the U.S. stood at 63.7 at the start of the year. Of the 20 metro areas surveyed, 11 had individual confidence levels higher than the U.S. as a whole. The overall U.S. ZHAI among all households, which measures consumers’ plans to buy and their attitudes toward the social value of homeownership, stood at 62.4.
“While it is reassuring to see all of the headline ZHCIs in positive territory, the underlying indicators … reveal significant variability,” says Pulsenomics Founder Terry Loebs. “Several of these drivers of overall housing confidence registered negative or only marginally positive readings in some cities. These data confirm that real estate recovery and economic healing are relative, local phenomena …”
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