A new measure of resident’s confidence in the housing market launched by real estate portal Zillow shows the inhabitants of greater Boston are slightly less confident about the market and slightly less likely to want to purchase in the next year than the U.S. average.
Zillow’s inaugural Housing Confidence Index currently stands at 63.7 for the nation as a whole, and 63.4 for the Boston area, with 8 percent of Bay State renters wanting to purchase in the next year compared to 10 percent of renters across the country.
To compute the index, Zillow worked with economic data analytics firm Pulsenomics to survey and analyze consumer’s attitude toward homeownership in 20 large metro markets across the country, surveying them on their attitudes toward homeownership and desire to buy and own a home within the next year. An index number above 50 indicates that consumers are confident and feel positively about owning a home.
The results of Zillow’s survey suggest there could be a pool of up to 4.2 million potential first time homebuyer across the country itching to enter the market. In the greater Boston area, the 8 percent of renters who expressed a desire to purchase would add up to 52,000 potential new owners.
But the firm warned that existing headwinds, including tight inventory, rising mortgage interest rates and growing affordability problems in a handful of areas, may make it difficult for potential buyers to follow through on those aspirations as the market enters the busy spring home shopping season.
In Boston in particular, those aspirations could be tough to fulfill: Inventory here declined by more than 11 percent in January according to Zillow’s calculations, in contrast with an 11 percent increase in the U.S. as a whole. Tighter inventory could also be contributing to Boston residents’ relatively lower confidence levels in the overall housing market, Zillow spokesman Cory Hopkins suggested in a statement.
Homeownership aspirations among current renters were the highest in Miami, Atlanta and Las Vegas, three metro areas that were among the hardest-hit by the housing recession.
Mortgage interest rates are also on the rise, currently standing at about 4.2 percent nationally, according to the Zillow Mortgage Marketplace, well above 2013 lows of roughly 3.3 percent. And as interest rates rise, homes in a number of particularly hot markets 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 homebuyers," Zillow Chief Economist Stan Humphries said in a statement. "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."
