A study by Berkshire Hathaway HomeServices finds current and prospective homeowners are increasingly optimistic about U.S. real estate. Respondents cited low interest rates, an improving economy and increasing housing inventory as key reasons for their growing optimism.
Reversing downward trends for the past two surveys, 61 percent of current homeowners and 65% of prospective homeowners now see the real estate market as more favorable for sellers and buyers. In fact, 76 percent of prospective homeowners — a survey group composed mainly of millennials and Gen-Xers said this year is a more ideal time to buy a home. That represents an 11-point jump from the December survey.
“Our data underscores what we’re beginning to see across America —that millennials are increasingly interested in homeownership and its virtues,” said Gino Blefari, CEO of HSF Affiliates. “They understand that mortgage rates are still low, the economy and jobs pictures look good and that housing remains a fundamental, long-term investment. Opportunity is opportunity, no matter your demographic.”
Respondents seem to have shaken off the effects of the Federal Reserve’s December rate hike. In the December Homeowner Sentiment Survey, 68 percent of prospective homeowners polled said that increased rates would have “some impact or a strong impact on my life.” Yet mortgage rates trended lower and remain near historic lows. Though the Federal Reserve has pledged additional increases in its benchmark interest rate, respondents cited lower rates as the primary reason for their optimism toward real estate. In fact, an increasing number of current homeowners — whose ranks are mostly Boomers and Gen-Xers — see modest mortgage rate hikes as a sign that the real estate market is heading in the right direction.
“Though no one can predict the future, we believe there’s a high probability that mortgage rates will remain low for the foreseeable future,” said Berkshire Hathaway HomeServices President Stephen Phillips. “The Federal Reserve will act responsibly with future rate increases yet, to a degree, its hands are tied by the shaky state of the global economy. Aggressive tightening would not only choke progress in the U.S. economy, but would also impact foreign economies that continue to seek stability.”
Prospective homeowners are significantly less concerned than in December (by 17 percentage points) that low housing inventory, which has hampered real estate’s recovery in many markets, will hurt their chances to find the right home. They are less concerned (by 10 percentage points from the previous survey) that new lending requirements will make it more difficult to qualify for home loans.
However, 72 percent of prospects showed increasing concern that rising home prices will make it more difficult to buy a home. That’s a 6-point jump from the December survey. To purchase their ideal home, current homeowners and prospects said they are more willing to forego swimming pools, accessibility to public transportation, basements and proximity to their workplace. They are less likely to compromise on location within a good community, a good floor plan, proximity to solid schools and the outward appearance of a home.
“We expect a busy spring home-buying season with momentum extending through the year,” said Blefari. “As millennials increasingly embrace homeownership, it will add to a domino effect among move-up buyers that should ease tight inventory in many markets and bring more balance to real estate overall.”
The full survey details are available upon request.