NAR: Consumers almost giddy – but renters wary of buying
WASHINGTON – March 15, 2017 – Multiple years of uninterrupted job gains and hope that the best is yet to come in 2017 are igniting consumer confidence across the country, and especially in rural and middle America, according to a new consumer survey from the National Association of Realtors® (NAR). The survey also found a growing disparity among renters who think it's a good time to buy and homeowners who think it's a good time to sell.
In NAR's ongoing quarterly Housing Opportunities and Market Experience (HOME) survey, respondents were asked about their confidence in the U.S. economy and various questions about their housing expectations.
In the first three months of 2017, the share of households believing the economy is improving soared to its highest share in the survey's five-quarter history (62 percent), and is up from 54 percent last quarter and 48 percent in March 2016.
But in a reversal from previous quarters that NAR Chief Economist Lawrence Yun calls extraordinary, the surge in positive sentiment about the economy is primarily from respondents living in the Midwest (67 percent; 51 percent last quarter) and rural areas (63 percent; 43 percent last quarter). Last March, only 49 percent of Midwesterners and 35 percent of those living in rural areas thought the economy was improving.
"Confidence levels generally rise after a presidential election as the nation hopes for the best," says Yun. "Even though it is a highly polarized country, consumers for the most part have upbeat feelings about the economy right now. Stronger business and consumer morale typically leads to even more hiring and spending, which in turn encourages more households to make big decisions like buying a home. These positive developments would be especially good news for prospective homebuyers in the more affordable Midwest region."
Higher confidence in the economy is also translating to better feelings about households' financial situation. The HOME survey's monthly Personal Financial Outlook Index shows that respondents' confidence that their financial situation will be better in six months jumped to its highest reading in the survey – to 62.6 in March from 59.8 in December 2016. A year ago, the index was 58.1.
Challenges dim renter optimism
On the cusp of the busy spring season, most households believe it's a good time to buy a home. However, confidence continues to trickle backwards among renters: 56 percent said now is a good time to buy, which is down both from last quarter (57 percent) and a year ago (62 percent).
But 80 percent of homeowners (78 percent in December 2016; 82 percent in March 2016) think it's a good time to make a home purchase. Younger households, renters and those living in the costlier West region – where prices continue to spike – are least optimistic.
"Inventory conditions are even worse than a year ago, and home prices and mortgage rates are on an uphill climb," says Yun. "These factors are giving many renter households a pause about it being a good time to buy, even as their job prospects improve and wages grow. Unless there's a significant boost in supply levels this spring, these constraints will unfortunately slow or delay some prospective buyers' pursuit of purchasing a home."
More homeowners view selling favorably
One promising trend that could alleviate supply shortages: A notable bump in the share of respondents this quarter who believe it's a good time to sell a home: 69 percent of homeowners think it's a good time to sell, which is up from last quarter (62 percent) and a year ago (56 percent). Continuing the trend over the past year, those in the West continue to be the most likely to think now is a good time to sell (77 percent), while also being the least likely to think it's a good time to buy (61 percent).
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