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Homeowners Wary of Housing Market's Future

Homeowners are wary of where the housing market is going, while rising prices in some markets are driving renters away from homeownership aspirations, according to the mid-year results of the Zillow Housing Confidence Index (ZHCI)

- Homeowners are confident about the current state of the housing market, but they are less exuberant about future market performance.

- Millennials are ready to buy in slowing housing markets, but they are dialing back their plans to buy in red-hot tech markets like Denver, Seattle, and San Francisco.

- 4.9 million renters say they plan to buy in the next year, down from 5.2 million in January.

Sep 10, 2015

SEATTLE, Sept. 10, 2015 /PRNewswire/ -- Homeowners feel great about the current state of the housing market, but for the first time are less optimistic about the future, according to the Zillow® Housing Confidence Index (ZHCI)i.

The survey 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 aspirations for homeownership. Past surveys found homeowners feeling exuberant about the future, with 5.2 million renters saying they planned to buy this year.

The percentage of renters who say they plan to buy a home in the next year fell from 12.1 percent to 11.4 percent in the first six months of this year, and a smaller percentage of those surveyed said it was a good time to buy. The percentage of those surveyed who believe people who have recently bought a home will be better off in 10 years fell from 61 percent to 59 percent.

"The housing market is slowing down, and Americans' confidence in the future of the market is understandably fading a bit, too," said Zillow Chief Economist Dr. Svenja Gudell. "Despite remaining quite confident overall, homeowners are less confident about the future than they are about the present. Seeing still stronger than normal home value appreciation in markets like San Francisco and Seattle might remind them of the last housing bubble. But the good news is things are leveling off with no crash in sight. If incomes rise to keep up with home values – and that's a big if – people can count on homeownership in their future, even in hot markets."

Home value growth has slowed in almost all housing markets this year, giving homebuyers some breathing room. In those markets with marked slowdowns, many more buyers are looking to buy their first home. For example, eight percent of Philadelphia renters said they planned to buy within a year in the January survey, when home values were rising at a 3.1 percent annual rate.  In July, when Philadelphia home values were flat, 18 percent said they planned to buy within a year. And many of those new potential buyers are millennials. Just one percent of 18- to 34-year-old Philadelphia renters surveyed in January planned to buy within a year, but that had increased to 23 percent in the July survey.

The opposite occurred in markets where home value growth, despite having slowed overall, is still well above national norms. Here, renters are less optimistic about their buying prospects. In San Francisco, 18 percent of 18- to 34-year-old renters planned to buy a home within a year when asked in January. At that point, San Francisco home values were rising at a 7.9 percent annual rate. In July, home values were up 11 percent year-over-year, and only five percent of millennial renters surveyed then said they planned to buy within a year.

In January, 45 percent of all households surveyed in San Francisco said it was a good time to buy a home, and 40 percent said it was a bad time. In July, the numbers had flipped: 40 percent said it was a good time, and 46 percent said it was a bad time to buy.

Similar patterns played out in technology boom towns Seattle, San Jose and Denver as home values there kept soaring.

Despite high home values in San Jose, the Silicon Valley market was ranked first among 20 markets for housing confidence. Homeownership aspirations there, however, ranked behind more affordable metros: Atlanta, Miami, and Las Vegas.

Seattle rose from number 10 to number two for housing confidence overall, and those surveyed expressed higher expectations for the housing market in the future. Denver, too, rose from number eight to number three, fueled by both renters and owners feeling great about the market and expecting growth, even if they are less confident about their own ability to buy.

The ZHCI is derived from the U.S. Housing Confidence Survey (HCS), which polls 10,000 homeowners and renters about housing market conditions, expectations for the future and their attitudes toward homeownership in generalii, across 20 of the large metro areas in the United States. Zillow sponsors the ZHCI and HCS, which were developed and are maintained by Pulsenomics LLC.

"In the eyes of households in 17 of the 20 metropolitan areas, the outlook for the real estate market has dimmed since the start of 2015," said Terry Loebs, Founder of Pulsenomics. "Given the out-sized impact of homeownership on personal balance sheets and its interplay with the aspirations and behaviors of U.S. consumers, if this downshift in housing expectations persists, it could portend a longer period of price deceleration and more sluggish consumer spending than some people are currently expecting."

Metro

% Renters Who Plan to Buy in next 12 months

Year-over-year Home Value Growth

Housing Confidence Rank, January 2015

Housing Confidence Rank, July 2015

United States

11.4%

3%

N/A

N/A

Atlanta

12%

5.8%

12

11

Boston

10%

2.5%

14

13

Chicago

15%

2.6%

18

16

Dallas

10%

13.3%

4

10

Denver

15%

13.9%

8

3

Detroit

11%

6.4%

19

18

Las Vegas

12%

5.9%

13

9

Los Angeles

11%

2.6%

6

8

Miami

21%

8.9%

2

5

Minneapolis

13%

2.6%

15

15

New York-Northern New Jersey

5%

1.5%

11

17

Philadelphia

18%

0.1%

17

19

Phoenix

14%

4.0%

9

4

St Louis

12%

5.6%

20

20

San Diego

8%

5.2%

7

12

San Francisco

8%

11.0%

3

7

San Jose

5%

11.5%

1

1

Seattle

2%

6.6%

10

2

Tampa

19%

6.4%

16

14

Washington DC

16%

-0.7%

5

6

About Zillow
Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc.

About Pulsenomics:
Pulsenomics LLC is an independent research and consulting firm that specializes in data analytics, new product and index development for institutional clients in the financial and real estate arenas. Pulsenomics also designs and manages expert surveys and consumer polls to identify trends and expectations that are relevant to effective business management and monitoring economic health. Pulsenomics LLC is the author of The Home Price Expectations Survey™, The U.S. Housing Confidence Survey, and The U.S. Housing Confidence Index. Pulsenomics®, The Housing Confidence Index™, and The Housing Confidence Survey™ are trademarks of Pulsenomics LLC.

i The ZHCI is computed by Pulsenomics from data compiled by the Zillow-sponsored U.S. Housing Confidence Survey (HCS), consisting of more than 10,000 completed household interviews with adult landline and cellphone users nationwide. This edition of the ZHCI is derived from data collected in the July 2015 edition of the HCS, conducted between July 7 and July 16, 2015. At a 95% confidence interval, the theoretical margin of sampling error for an aggregated, household-weighted sample of 10,000 (comprised of 20 metro-level probability samples of 500 each) is +/- 1.2%, and larger for sub-groups (e.g., +/- 1.5% for all homeowner households, and +/- 2.0% for all renter households). More than 350,000 consumer responses pertaining to the real estate market where each survey respondent lives are recorded by Pulsenomics to produce each edition of the ZHCI. To view or download all 252 index values that comprise each edition of the ZHCI data set, or to learn more about the ZHCI calculation methodology, please visit Zillow.com/research or pulsenomics.com.
ii The ZHCI headline index is comprised of three sub-indices: The Housing Market Conditions Index (HMCI), which measures prevailing market trends and buying/selling conditions. The Housing Expectations Index (HEI), measuring expected changes in home values, home affordability and the value of homeownership. The Homeownership Aspirations Index (HAI), which measures household home-buying plans and attitudes toward the social value of homeownership. It is measured on a 0-100 scale, with readings above 50 indicating positive sentiment.

 

SOURCE Zillow

For further information: Emily Heffter, Zillow, 206-757-2701, press@zillow.com


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