American consumers' enthusiasm for the housing market rose over the summer from the year's start, but expectations for future market performance have become more subdued, according to survey results released by Zillow.
The company's latest Housing Confidence Index, released September 23, rose to 64.2 in its latest reading, up from 63.7 in January. The index, which is sponsored by Zillow and developed by Pulsenomics, ranges on a 100-point scale, with readings above 50 indicating overall positive sentiment.
Two of the three component sub-indices improved through the summer: the measure of current market trends and conditions rose more than half a point to 62.7, while the measure of homebuying plans and attitudes toward homeownership climbed more than two points to 62.4.
On the other hand, the gauge of expected future changes in home values and affordability fell slightly, decreasing to 66.1—in line with the company's forecast of home value growth decreasing over the next year.
Overall, confidence increased among residents of 11 of the 20 major metros surveyed, with San Francisco (68.2), Seattle (67.5), and San Jose (67.4) leading. Trailing the other markets were Philadelphia (59.7), Chicago (60.0), and St. Louis (60.8).
Among the thousands of Americans surveyed, confidence is higher among renters as purchase conditions continue to look favorable and rent prices climb. Sentiment is especially high among younger renters: Among millennials, 82 percent said they are confident or somewhat confident they can afford a home someday compared to 64 percent of Generation X renters and 48 percent of baby boomer renters.
Zillow Chief Economist Stan Humphries called the response from millennials "heartening ... because today's renters by necessity are tomorrow's buyers."
"Cynics might argue that these results represent no more than youthful exuberance, or perhaps some naivete, but that's missing the point," Humphries said. "We need this generation to be confident and wanting to buy, regardless of the difficulties they face."
Those difficulties include student loan burdens, uncertain job prospects, and a limited stock of starter homes.
Millennials' comparatively high confidence extends beyond home values. In the survey, nearly two-thirds (65 percent) of that group said they agree with the statement that homeownership is necessary to living "the good life" and is a key part of the American Dream. That compares to only 56 percent of Gen X respondents and 55 percent of baby boomers.
"Although strong aspirations are no substitute for financial capacity or creditworthiness on a mortgage loan application, this feedback from millennial renters is significant because it confirms that they bear relatively few psychological scars from the housing bust, and because the attitudes of this generation will drive housing trends in the decades to come," said Terry Loebs, founder of Pulsenomics.