According to the Trulia American Dream survey, consumer optimism about homeownership is improving, with one in four consumers feeling more positive about homeownership than they did six months ago, and one in three renters planning to buy a home in the next two years. The survey has tracked consumer sentiment around homeownership since 2008.
Trulia says that Millennials were “shaken, not scarred” by the real estate crash, and that while 43 percent of Americans aged 18 to 34 already own a home, 93 percent of those renting say they do plan to buy a home some day.
The report notes that compared to 2010, housing inventory was down in 2012 by 43 percent, limiting options for buyers. That said, 22 percent of current homeowners surveyed said they are at least somewhat likely to sell their home in the next year, especially those who bought between 2010 and 2012, who have likely seen their home values increase and are more likely to sell at a profit. Trulia says rising home prices may encourage sales in 2013.
In addition, with the exception of September’s Case-Shiller report for the Chicago area, each report has shown slight increases in home prices. With consumer confidence rising as prices rise, this correlation indicates that consumers have a more positive outlook on several factors relating to housing: their outlook of the job market and ability to find a job shows consumers are confident financially; and consumers are confident they’ll be at a job in their city for a longstanding period of time and won’t be forced to move to find a new job. In September, the level of consumer confidence was up to 70.3 percent from August’s number of 61.3 percent. This is the highest level seen since February, and these numbers are among the strongest seen since 2007, influencing an increase in consumer spending.
In addition, a recent report from Freddie Mac projects seven million borrowers will refinance their loans in 2012, resulting in $15 billion in mortgage payment savings in the first year. That savings will help further boost the economy by strengthening homeowners’ financial situations and overall consumer confidence.
“2013 could be the year that inventory turns around, just as 2012 was the year that prices started recovering,” Jed Kolko, Trulia’s chief economist, said. “Homebuyers need inventory to choose from, and with fewer foreclosures on the market, new inventory will come from new construction or homeowners wanting to sell. Rising prices will bring out more sellers, especially if price increases lift them back above water.”
Exercising cautious optimism
As opposed to former eras, the National Association of Realtors is approaching its future forecasting with cautious optimism. Lawrence Yun, chief economist at NAR, said that the housing market recovery should “continue through the coming years” unless the nation falls off of the fiscal cliff, and assuming that there are no further limitations on the availability of mortgage credit.
Yun pointed to improving existing-home sales, new home sales and housing starts as all seeing “notable gains this year in contrast with suppressed activity in the previous four years, and all of the major home price measures are showing sustained increases.”
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