More than 4 million first-time buyers want to enter the market, but they face some tough issues as market conditions aren’t exactly favorable to new buyers.
This conclusion came from the Zillow Housing Confidence Index (ZHCI), a new calculation released by Zillow and Pulsenomics.
The ZHCI is a measure of consumer sentiment; anything over 50 indicates a positive sentiment. The current national index is 63.7. Of the 20 metros surveyed, 11 had individual confidence levels above the national average.
In 19 of the 20 large metros surveyed, more than 5.0 percent indicated they wanted to buy a home in the next year. The report notes, "Among current renters, homeownership aspirations were particularly strong, with about 10 percent of all renters nationwide saying they would like to buy within the next 12 months."
A vast majority of respondents said they were "confident or somewhat confident" they could afford a home in 2014.
If every respondent who indicated they wanted to buy a home actually purchased one, first-time home sales would total more than 4.2 million for 2014, more than double the roughly 2.1 million first-time buyers in 2013.
While this optimistic total from Zillow suggests interest is high, actually purchasing a home should prove to be a challenge in the upcoming year.
Market conditions are mixed: inventory, up 11 percent from a year ago, is still well below optimal levels, and has fallen year-over-year in 8 of 20 metros measured by the ZHCI. Mortgage rates, once a record low 3.3 percent in 2013, have risen to 4.2 percent, according to the Zillow Mortgage Marketplace.
A dearth of inventory coupled with rising mortgage rates could push homes out of a homebuyer's price range, particularly for first-time buyers.
"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," said Zillow Chief Economist, Dr. Stan Humphries. "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."
He added, "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."
Areas indicated by the ZHCI with the highest interest in purchasing a new home come from metros that were hit hardest by the housing recession: Miami (67.5), Atlanta (62.9), and Las Vegas (64.1).
Each were near or above the national index of 63.7 for "Overall Housing Confidence."