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High Expectations Fueling Confidence of U.S. Homeowners and Renters

Nationwide, housing confidence rebounded at the start of the 2019 home-buying season. Despite lowered tax incentives for homeownership, optimism about future home values has spread more widely since last year, and a multi-year downtrend in home-buying sentiment has come to a halt.

BOSTON, June 12, 2019 /PRNewswire/ --

  • Housing confidence is at five-year high levels in Atlanta, Boston, Chicago, Miami, New York, St. Louis, and Washington DC. Year-over-year, homeowner confidence improved the most in Atlanta and diminished the most in Seattle, while renter confidence grew the most in Boston and receded the most in Las Vegas.
  • Members of the Gen Z and millennial generations have bolstered nationwide housing confidence during the past year. Among those who rent a home, eight in ten are confident or somewhat confident that they will be able to afford homeownership someday; two-thirds of them expect to buy a home within five years; six in ten believe that buying a home is the best long-term investment a person can make and that owning a home provides more freedom than renting one.

  • The Tax Cuts and Jobs Act of 2017 has elevated homeownership affordability concerns for about one in four households nationwide, but it appears to have had little or no impact on long-term expectations for home values, including those of residents who live in metropolitan areas with higher-priced properties. Consumers expect home values in their local real estate market will increase by an average of 6.1 percent in the coming 12 months, and by an average of 31.1 percent over the next decade.
Additional Housing Confidence Index data and infographics are available at https://pulsenomics.com/dashboards/

Pulsenomics® today released the latest updates to the U.S. Housing Confidence Index ™ (HCI) and Transaction Sentiment Index ™ (TSI), unique gauges of homeowner and renter mindsets concerning real estate market conditions, price expectations, homeownership affordability and aspirations. These attitudes, which vary by geographic market and household profile, affect consumer economic behavior and can signal future changes in home prices and transaction volume. These indices summarize and track responses to the biannual U.S. Housing Confidence Survey ™ (HCS), completed by 15,500 households across the country.

"Moderating home price growth, falling mortgage rates, and solid wage gains in Q1 have stoked housing expectations and homeownership aspirations," said Pulsenomics® founder, Terry Loebs. Home sales volume has been sluggish so far this year, but Loebs suggested that recent attitudinal shifts recorded among homeowners and renters are healthy and likely foreshadow a pick-up in transactions. "Although our research confirms significant variation in housing confidence and transaction sentiments by market and household category, overall, these latest index data point to an improving balance of power between real estate buyers and sellers. Across the larger markets we track, home-selling sentiment has weakened a bit in recent months, but the majority of homeowners still believe that, where they live, now is a good time to sell a home.  At the same time, a years-long downward trend in home-buying sentiment has come to a halt, as prospective purchasers have been encouraged by the combination of slower price growth and low mortgage rates," Loebs said.

The latest Pulsenomics index data also reveal that housing confidence among prospective first-time homebuyers has been resilient in the face of significant financial hurdles such as student loan debt. "Contrary to some popular narratives, the majority of Gen Z and millennial renters are looking forward to homeownership, are confident they'll be able to afford it, and say that when the time comes to buy, they will favor living in suburbia," Loebs explained.

Despite limited inventory of entry-level homes and concerns that the 2017 tax act might dent home-buying enthusiasm this year, overall, consumer assessments of local real estate market conditions, and their outlook for home price appreciation and affordability remains upbeat nationwide. Compared to last spring, more U.S. households expect price increases in their local real estate market will easily exceed the rate of inflation in the broader economy over the coming decade, and more of them are optimistic that in the long run, homeownership will be affordable and deliver significant investment value.

Pulsenomics adviser Robert Shiller was struck by the robust outlook consumers have for near-term and long-run home value appreciation. The Nobel laureate and Yale professor of economics opined, "At an average rate of more than six percent, household expectations for home prices over the next twelve months are remarkably high. But the expectations over the next ten years--at 2.7 percent a year nationwide--are entirely tame and reasonable, just a little over the 2 percent target inflation rate set by the Federal Reserve." Shiller concluded, "I would say that households nationwide are showing here a healthy optimism, but none of the extreme expectations seen in the runup to the 2008-9 financial crisis." 

About the Housing Confidence Index™ (HCI)
HCI quantifies and tracks consumer confidence in housing markets across the United States. HCI is a weighted average of three sub-indices: The Housing Market Conditions Index™  (HMCI), The Housing Expectations Index™  (HEI), and The Homeownership Aspirations Index™  (HAI). Attitudes that comprise these measures affect economic behavior, and they can foreshadow changes in home prices and transaction volume. Pulsenomics produces HCI series for the U.S., each of the four U.S. Regions, and 25 of the largest U.S. metropolitan areas by tenure category (i.e., homeowners, renters) and generation cohort (e.g., millennials). HCI is a diffusion index, with values on a scale of 0 to 100 (readings above 50 are favorable or positive). The source data for HCI are compiled from the biannual U.S. Housing Confidence Survey™  (HCS).

About the Transaction Sentiment Index™ (TSI)
TSI quantifies and tracks prevailing consumer attitudes concerning home-buying and home-selling in the context of a household's local real estate market. TSI has two components, the Buying Sentiment Index™  ("BSI", which measures the difference between the number people who say that "now is a good time to buy a home" and those who say that "now is a bad time to buy a home"), and the Selling Sentiment Index™  ("SSI", which measures the difference between the number people who say that "now is a good time to sell a home" and those who say that "now is a bad time to sell a home"). Pulsenomics produces TSI series for the U.S., each of the four U.S. Regions, and 25 of the largest U.S. metropolitan areas by tenure category (i.e., homeowners, renters) and generation cohort (e.g., millennials). TSI values are on a scale of -100 to +100. The source data for TSI are compiled from the biannual U.S. Housing Confidence Survey (HCS).

About the U.S. Housing Confidence Survey™ (HCS)
HCS is a biannual study of 15,500 adult heads of household in the United States focused on the consumer mindset concerning housing in the context of local real estate markets. Pulsenomics administers HCS via the internet and uses the credibility interval as its standard measure of estimated sampling error. A credibility interval is an estimate of an interval around a measured percentage within which the true percentage, if all eligible respondents were to be interviewed, would have a 95% chance of falling. Indicative credibility intervals for HCS are 1.1% for Composite 25 data (n=12,500), 1.2% for Composite 20 data (n=10,000), 2.2% for national data (n=3,000) and 5.3% for metro area data (n=500); credibility intervals are larger for subgroups.  The Q1 2019 edition of HCS was conducted between March 13, 2019 and March 20, 2019.

About Pulsenomics
Pulsenomics LLC is an independent research firm that specializes in data analytics, opinion research, 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®, Housing Confidence Survey™, Housing Confidence Index™, Housing Market Conditions Index™, Housing Expectations Index™, Homeownership Aspirations Index™, Transaction Sentiment Index™, Buyer Sentiment Index™, and Seller Sentiment Index™ are trademarks of Pulsenomics LLC. Additional information, including index calculation methodologies, survey questionnaires, credibility intervals, metro area rankings, infographics, and dashboards are available at pulsenomics.com.

Additional Transaction Sentiment Index data and infographics are available at https://pulsenomics.com/dashboards/

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