Falling mortgages rates have given the housing market the boost it needed, but First American’s Real Estate Sentiment Index (RESI) say affordability remains a factor.
“According to 57% of title agents and real estate professionals surveyed, the unexpectedly low mortgage rates of 2019 have increased home buyer demand in their market. In fact, only 15% disagreed with this sentiment,” said Mark Fleming, chief economist at First American. “However, despite lower mortgage rates boosting affordability and stimulating demand, 40% of survey respondents indicated that affordability is the primary obstacle to becoming a homeowner – this is not surprising as house prices nationally continue to grow, albeit at a slower pace in 2019.”
Fleming said the RESI found affordability to be the primary obstacle to homeownership, as those who found affordability to be an obstacle increased to 40% from 30.1% year-over-year.
“The main burden, affordability, confirms the strong sellers’ market conditions from 2018 have continued in many markets in early 2019, as demand outpaces supply and prices continue to rise,” Fleming said.
Overall, the RESI reported confidence in residential purchase volume growth over the next year decreased 5% compared to last year, confidence in refinance transaction volume growth over the next year increased 72.5%, and residential property prices are expected to increase by 3.8% by next year.
Residential price expectations are 0.4% lower than they were one year ago.
Fleming said through most of 2017 and 2018, homeowners faced what he called a “prisoners dilemma,” where many homeowners were stuck in the current home by the fear of not finding a new home, or losing their low mortgage rate.
“Not only have concerns over limited supply eased as an obstacle to homeownership, homeowners appear to be more willing to list their homes for sale because they are more confident in finding a home to buy, according to our survey of title insurance and real estate professionals,” said Fleming.
The RESI found that 37% of respondents said the supply of homes at the desired price point has increased, and is a greater influence by homeowners to list their homes for sale.