Location might be everything in real estate, but buyer perception isn’t far behind.
Consider that seventy-five percent of Americans believe their local housing market is cooling off--among them, 72 percent say they are not surprised, according to results from Valueinsured's Q4 2018 Modern Homebuyer Survey.
This shift in market perceptions follows five consecutive quarters where majority of Americans believed housing was overheated. Among states with the most robust home sales activity, 22 percent of residents in California, 19 percent in Colorado, 36 percent in Texas, and 22 percent in Washington say their local market is not cooling.
The ValueInsured Housing Confidence Index registered at 63.0, on a hundred-point scale in the fourth quarter, down 4.7 points in one year. Homeowners, historically the most confident segment on the Index, produced a score of 71.6 in the quarter, the second-lowest level recorded in 30 months.
The report indicates millennial homeowners are among the most bearish:
- 72 percent report home shoppers in their neighborhood are less aggressive now compared to one year prior.
- 67 percent expect a home bought in their neighborhood today will likely decrease in value one year from now.
A Shift from Seller's to Buyer's Market
Millennial homeowners' outlook signals the starter-home seller's market may have peaked. Fully 78 percent believe now is a good time to sell; however, only 38 percent of those who wish to buy a starter home in the near future believe now is a good time to buy--down 8 points in one year. This is meaningful, as starter-home owners' hesitancy to sell and the subsequent inventory drought had been a key catalyst that drove up home prices in many major markets in recent years.
From Bidding Wars to Waiting-It-Out
Despite observing market adjustments, 72 percent of all Americans and 78 percent of urban residents believe home prices are still too high. The latest data represent 10-point and 13-point increases, respectively, from Q2 2018. Urban homeowners in particular blame flippers and speculative investors (70 percent) and wealthy transplants from more expensive housing markets (66 percent) for inflating their local home prices to unsustainable levels.
Theories for what inflated home values aside, many prospective homebuyers now plan to wait it out before pulling the trigger:
- 59 percent of all interested homebuyers (including first-time and upgrade buyers) say they plan to wait for a "meaningful correction" before buying
- 14 percent plan to drop out of buying altogether if a correction does not occur
"In August 2017, ValueInsured was among the first to report Americans' concerns about overheated housing and a possible correction," said Joe Melendez, CEO and founder of Valueinsured. "Fast forward fifteen months, Southern California is in its worst housing slump in over a decade, Seattle leads the nation in fastest home-price drop, and North Texas has the largest sales decline in seven years. Expect the market to stall in the near term."
