Welcome to October. Fall is in the air for most of the country and Halloween decorations are everywhere. For the housing industry, now is the time for an abundant supply of reports on the hot spring and summer home-buying season, or was it?
Recent "unexpected" housing news was not so unexpected
In recent weeks, we are beginning to see “unexpected” housing headlines that are not quite rosy: U.S. existing home sales unexpectedly fall in July, Sales of new homes drop 9.4%, decline way exceeds expectations, Pending home sales drop 2.6% in August; top Realtors economist warns housing market "stalled". Home prices are still up nationally and way up in some hot markets such as Seattle and Denver, but analysts are starting to report “warning signs”. Just this week, CoreLogic reported nearly half of the largest 50 markets in the nation are overvalued. If some of us are surprised, it appears homeowners and homebuyers may not be.
In ValueInsured’s Modern Homebuyer Survey conducted in July, 57% of all homeowners say they believe their local housing market is overvalued and unsustainable. 83% of Millennial first-time homeowners went as far as saying they are at the top of the real estate market right now before prices correct. In the same survey, 63% of interested homebuyers say they are worried they could be “buying high”. 66% of all interested homebuyers in American and 71% of interested Millennial homebuyers reported they believe more people would opt out of their local market or return to renting if prices continue to rise, essentially “stalling” the market.
So were these homebuyers and homeowners weeks and months ahead of the latest reports? They could be. After all, these buyers and owners are out at open houses, speaking with neighbors, taking note of for-sale yard signs and when the list price at the house next door is dropped. They are locals who have their ears to the ground.
In the same July survey, 63% Millennials also reported noticing more people “over-leveraging themselves to buy homes they can’t really afford”. 55% reported noticing mortgage lending is becoming riskier again. Six weeks after the survey was conducted, we see in the headlines that Homebuyers rush to riskier mortgages as home prices heat up, and Millennials over-extending when it comes to home buying.
It goes to show that homebuyers may not have fancy charts and graphs, but their sentiments are often pretty reliable predictors of what will happen in the market. While home prices continue to rise, only 48% of all homebuyers and 43% of starter-home buyers showed confidence this summer that a home they buy now would be worth more by end of 2018. Could more than half of them be right?