More than four million first time buyers want to enter the housing market in the United States in 2014, buoyed by strong housing market confidence, it is claimed.
Home ownership aspirations is highest among people who are currently renting their homes and in markets hardest hit by the housing recession according to a new index from Zillow.
The firm’s inaugural Housing Confidence Index stands at 63.7 and it shows that if all renters indicating they want to buy a home in the next year actually did, it would represent more than 4.2 million first time home sales.
Renters in Miami, Atlanta and Las Vegas expressed the most desire to become home owners and but their aspirations are unlikely to be realized soon as home ownership headwinds persist, the firm points out.
Barriers include tight inventory, rising mortgage interest rates and growing affordability problems in a handful of areas, and these may make it difficult for potential buyers to follow through on those aspirations as the market enters the busy spring home shopping season.
In 19 of the 20 large metro areas surveyed, more than 5% of all residents indicated they wanted to buy a home in the next year. Among current renters, homeownership aspirations were particularly strong, with about 10% of all renters nationwide saying they would like to buy within the next 12 months.
The vast majority of these respondents also said they were confident or somewhat confident they could afford home ownership now.
If all renters that indicated they wanted to buy actually did purchase a home in the next year, it would represent more than 4.2 million first time home sales, more than double the roughly 2.1 million first time home buyers in 2013.
While inventory is up 11.1% nationally compared to a year ago it still remains well below optimal levels, and has fallen year on year in eight of the 20 metro areas surveyed by the index.
Zillow also points out that recent data from the Census Bureau indicates that the share of new homes built as rental units has grown, while the share of new construction dedicated to the kinds of single family homes likely to be favored by first time buyers is down.
Mortgage interest rates are also on the rise, currently standing at about 4.2% nationally, according to the Zillow Mortgage Marketplace, well above 2013 lows of roughly 3.3%.
And as interest rates rise, homes in a number of particularly hot markets, including San Francisco, Los Angeles, San Jose and San Diego, are already looking unaffordable for buyers with lower incomes, especially first time buyers, as more income is devoted to mortgage payments.
‘For the housing market to continue its recovery, it is critical that homes are both available and remain affordable to meet the strong demand these survey results are predicting, particularly from first time buyers,’ said Zillow chief economist Stan Humphries.
‘Even after a wrenching housing recession, this data shows that the dream of homeownership remains very much alive and well, even in those areas that were hardest hit. But these aspirations must also contend with the current reality, and in many areas, conditions remain difficult for buyers. The market is moving toward more balance between buyers and sellers, but it is a slow and uneven process,’ he explained.
While it is reassuring to see all of the headline indices in positive territory, the underlying indicators of home ownership aspirations, housing market conditions and expectations for each metro area and tenure segment reveal significant variability,’ said Pulsenomics founder Terry Loebs.
‘Several of these drivers of overall housing confidence registered negative or only marginally positive readings in some cities. These data confirm that real estate recovery and economic healing are relative, local phenomena, and in some instances, likely reflect the lingering psychological impact of the housing bust,’ he added.
This article was republished with permission from Property Wire.