Consumer Confidence Remains Low Among Potential Home Buyers
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Many would-be homeowners are still choosing to rent instead of buying a home. Home buyer confidence remains low nationally, even though mortgage interest rates are at historic low levels. Here is an article from Realtor.com that gives some ideas as to why consumer confidence remains low among potential home buyers.
National optimism? What national optimism? Fewer Americans think it’s a good time right now to buy a home, according to a report released on Monday.
Stagnant wages and climbing housing prices led to a 1.7-point drop last month in consumer optimism toward owning a home, according to Fannie Mae’s monthly Home Purchase Sentiment Index. The index dipped from 83.2 points in December to 81.5 points in January. It ranges from -36.5 to 163.5 points.
“People need to see bigger wage increases to be able to afford a home and collect the down payment,” said Steve Deggendorf, director of strategic research at Fannie Mae.
Just 31% of the survey’s 1,000 participants said it was a good time to buy last month. And only 12% of respondents said their household income was significantly higher than it was a year ago—down 3% from December.
“Jobs are increasing, but wages really haven’t caught up,” said Jonathan Bowles, executive director of the Center for an Urban Future, a New York City–based think tank. He added that it’s become harder for aspiring homeowners to save up for a down payment than it was for previous generations. “It certainly puts homeownership out of reach for a lot of Americans.”
This could lead to a smaller share of Americans who own property, as fewer first-time home buyers have the resources to break into the market, warned Mark Willis, a senior policy fellow at the Furman Center for Real Estate and Urban Policy at New York University.
The bright side was that mortgage rates fell slightly for the fifth week in a row, according to Freddie Mac. The average rate for a 30-year fixed mortgage dipped from 3.79% to 3.72%, and the 15-year fixed mortgage dropped from 3.07% to 3.01%. Five-year Treasury-indexed hybrid adjustable-rate mortgages dropped from 2.9% to 2.85%.
Lower mortgage rates can make buying more affordable, said Jonathan Smoke, chief economist at realtor.com®. And more potential buyers may be motivated to buy, as rents are also steadily heading up.
“The alternative to buying a home [renting] isn’t more attractive—especially for the longer term,” Smoke said. “Rents already in most places [exceed] what it costs to buy a home with a mortgage.”
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