Overall Americans are more confident about the housing market than at the start of the year, according to the latest Zillow Housing Confidence Index.
The index increased to 64.2 over the summer, up from 63.7 in January, and housing confidence increased among residents in 11 of the 20 major metro areas surveyed.
The ZHCI, sponsored by Zillow and developed by Pulsenomics, is measured on a 0 to 100 scale, with readings above 50 indicating positive sentiment. The headline index is comprised of sub-indices which measure prevailing market trends and buying/selling conditions, expected changes in home values, home affordability, the value of home ownership and, household home buying plans and attitudes toward the social value of home ownership.
But the analysis also reveals that consumers’ expectation is for more modest home value growth going forward are this is in line with Zillow's predictions for slower home value growth over the next year.
The Zillow Home Value Forecast, which predicts home value growth of 3.1% through next August, is down from 6.6% over the past year.
The report also shows that overall, housing confidence is higher among home owners than renters, likely owing to historically high rents and favorable home buying conditions.
An analysis of data within the 10,000 completed survey questionnaires used to calculate the ZHCI reveals that younger renters are upbeat about their future home buying prospects. Among renters aged 18 to 34 some 82% said they were confident or somewhat confident that they will be able to afford to own a home someday, compared to 64% of those aged 35 to 49 and 48% of those aged 50 to 64.
Then younger age group were also far more optimistic about future home value appreciation with 33% saying that they expected home values to rise more than 6% per year over the next decade, compared to 21% of the middle age group and 15% of the older age group.
‘It's heartening to see younger renters express so much confidence in their ability to buy a home in coming years, because today's renters by necessity are tomorrow's buyers,’ said Zillow chief economist Stan Humphries.
‘Cynics might argue that these results represent no more than youthful exuberance, or perhaps some naiveté, but that's missing the point. We need this generation to be confident and wanting to buy, regardless of the difficulties they face,’ he explained.
‘And there are difficulties, including saving for down payments in the face of high rents and high student debt burdens, uncertain job prospects among younger workers and limited entry-level home inventory. But optimism is a necessary first step, and indicates a desire among a very creative generation to find creative solutions that will enable them to achieve home ownership,’ he added.
The report suggests that in some respects, younger potential buyer’ views toward housing may be more conventional than older generations. Some 65% said they agreed with the statement that owning a home is necessary to living a good life and is central to the American dream, compared to 56% of the middle generation an d 55% of the older group.
‘Although strong aspirations are no substitute for financial capacity or credit worthiness on a mortgage loan application, this feedback from millennial renters is significant because it confirms that they bear relatively few psychological scars from the housing bust, and because the attitudes of this generation will drive housing trends in the decades to come,’ said Pulsenomics founder Terry Loebs.
‘Regarding the outlook of renters across all generations, in 14 of the 20 major metro areas in which we conduct our research, a majority of renter households don't believe that right now is a good time to buy a home. However, a larger, two thirds majority of these 3,764 renter households said that owning a home someday is a specific goal that they are determined to reach, or something that they think about a lot,’ he added.
This article was republished with permission from Property Wire.