Trulia‘s Chief Economist discusses the findings from Trulia’s latest American Dream survey. Consumer optimism about homeownership is rebounding as the housing market recovers, even among young adults who were often pegged as renters for life during the recession. Meanwhile, rising prices will encourage some homeowners to sell in 2013.
Trulia’s year-end 2012 American Dream surveyreveals how today’s consumers are more optimistic about the housing market and more ready to buy. For Millennials, the recent housing bust shapes their near-term expectations about the market in general, but nearly all young renters want to buy in the long run. Going into 2013, consumers expect inventory to expand, and it looks like that will happen so long as prices keep rising: as price gains push more homeowners into positive equity, more will be willing to sell.
To get Americans’ take on homeownership, we worked with Harris Interactive to conduct an online survey of 2,083 U.S. adults between November 15-19, 2012. For the full methodology, see below.
Americans More Bullish on Buying HomesAs 2012 wraps up, the housing market is looking up on all fronts. It was the first year since 2006 in which home prices will have increased. In addition, construction and sales are both significantly up from their lowest point during the housing crisis, and vacancies, delinquencies, and foreclosures have all come down. Key for the housing market, job growth has picked up, and unemployment has fallen to 7.7% from 8.2% six months ago and 9.8% two years ago. These trends all give consumers more buying power and more confidence in the economy
As a result, consumers are increasingly bullish on buying homes. More than 1 in 4 Americans (27%) are more positive about homeownership than they were six months ago, compared with 19% who reported feeling more negative about homeownership. That translates into more renters being eager to buy in the next two years:
| Survey |
% of renters planning
to buy in next two years |
| January 2011 |
22%
|
| May 2012 |
28%
|
| November 2012 |
31%
|
But homeownership still has its skeptics. In November, 72% of consumers said that homeownership is part of their personal “American Dream.” That’s unchanged since May and up a bit from 2011, when 70% of consumers said so in our January and August surveys. But fewer consumers today believe in homeownership than in 2009 and 2010, when 76% and 77% (respectively) agreed. Will this sentiment bounce back, or has the housing crisis permanently taken the dream of homeownership down a notch? Only time will tell.
Millennials and the Housing Bust: Shaken, Not ScarredThe housing crisis looms especially large for younger adults–those aged 18-34 years old–who’ve only been thinking seriously about housing in these recent years of boom and bust. They have no memory of the decades when home prices rose modestly but steadily, or when mortgage rates were 7%, or up to 10%. These younger adults had a particularly rough recession: their unemployment rate peaked at 10.6% in October 2009, compared with 10.0% for adults overall, and many put off the decision to buy or rent their own home, and instead doubled up with roommates or lived with parents. This age group really matters for the housing market: their decisions about forming households and homeownership directly affect housing demand.
Our survey shows these Millennials haven’t been permanently scarred by the recession. Few have written off homeownership. Among 18-34 year-olds, 72% say homeownership is part of their personal American Dream–same as for the adult population overall. And the vast majority of young renters plan to own: 93% of 18-34 year-old renters plan to purchase a home someday. Older renters are more likely to say they’ll never buy than these young renters are. And, 43% of these younger adults are homeowners already. That leaves very few young adults who rent today and plan to rent forever.
However, despite these long-term aspirations, younger adults see a very different near-term housing market in their crystal ball. Consumers, regardless of age, expect both rents and housing prices to rise in 2013; they also expect more inventory, both for rent and for sale, and higher mortgage rates:
% expecting increase
|
% expecting decrease
|
Difference
(increase minus decrease) | |
| Rents |
46%
|
9%
|
37
|
| For-sale inventory |
41%
|
14%
|
27
|
| Home prices |
46%
|
19%
|
27
|
| Mortgage rates |
40%
|
15%
|
25
|
| For-rent inventory |
35%
|
15%
|
20
|
| Note: respondents could also answer “no change” or “not sure”. | |||
Younger adults, though, have a harder time imagining price increases and higher mortgage rates than older adults who have lived through more years of rising prices and high rates. Just 37% of Millennials expect prices to rise in the next year, and 22% expect prices to fall:
| Age: |
18-34
|
35-44
|
45-54
|
55+
|
| % expecting prices to rise next year |
37%
|
43%
|
49%
|
55%
|
| % expecting prices to fall next year |
22%
|
15%
|
19%
|
18%
|
| Note: respondents could also answer “no change” or “not sure”. | ||||
They’re also much less likely than older adults to expect higher mortgage rates: among 18-34 year-olds, 32% expect rates to rise next year and 20% expect lower rates next year. That means younger adults may be in for a rude awakening when they try to buy. With lower expectations about prices and mortgage rates, Millennials have higher hopes than older adults that homeownership will remain relatively affordable. Today’s young renters may be overestimating what they’ll be able to afford to buy when their time comes.
Rising Prices Will Encourage Sales in 2013Nearly one third of renters want to buy in the next two years–but will they find homes for sale? In 2012, inventory was down 23% nationally year-over-year, and down 43% since the summer of 2010, according to the Department of Numbers’ HousingTracker. Much of this decline is thanks to fewerforeclosed homes on the market. In 2013, two forces could add to inventory, expanding the options for would-be buyers: (1) more construction of new homes, and (2) more homeowners selling existing homes. Our American Dream survey shows that rising prices in 2013 could trigger more sales–and therefore bring more inventory onto the market.
Among current homeowners, 22% said they are somewhat likely, fairly likely, or extremely likely
to sell their home in the next year. Who’s going to sell in 2013? Based on our survey and local market conditions, the homeowners more likely to sell next year are those who:| Year Home Was Bought |
2002 or earlier
|
2003-2006
|
2007-2009
|
2010-2012
|
| % at least “somewhat likely” to sell in 2013 (survey response) |
20%
|
23%
|
20%
|
33%
|
| % whose homes today are worth more than at purchase (Trulia estimate) |
98%
|
49%
|
7%
|
72%
|
If prices rise in 2013, more people will be encouraged to sell. But prices and market trends aren’t the only factor s that determine s who sells. Many personal reasons go into the decision whether to stay put or move. In fact, family is the top reason why homeowners might sell next year:
But economics still matter. A stronger economy could give more people reason to sell since they might find a new job worth moving for. During the recession, Americans became less mobile than usual, but as the economy recovers, more might move for job opportunities.
Consumers are entering 2013 more optimistic about the housing market. More renters plan to buy, and more homeowners will sell, especially if prices continue to rise. The housing crisis still hangs over the market
MULTIMEDIA
SURVEY METHODOLOGYThe November 2012 survey was conducted online within the United States by Harris Interactive via its QuickQuery omnibus product on behalf of Trulia between Nov 15-19, 2012 among 2,083 U.S. adults, of whom 1,271 are homeowners and 741 are renters.
The previous surveys were conducted online within the US by Harris Interactive via its QuickQuery omnibus product on behalf of Trulia on the following dates:
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