Consumer confidence about housing markets reached its highest levels ever in April 2018, according to the Fannie Mae Monthly Sentiment Index.
Of the six components in this Monthly Sentiment Index, only one component fell…the share of people who think that “now is a good time to buy a home.” No wonder. Home prices took their biggest jump in years in March 20128, up 7% compared with March 2017, according to S&P’s CoreLogic Case Shiller Index and mortgage interest rates are rising…perhaps too quickly.
The number of people who believe that “now is a good time to sell a home” rose in April. And the number of people who believe that “prices will continue to rise” jumped to its highest level ever.
More respondents to April’s Fannie Mae Monthly Sentiment Index think their incomes will rise over this next year. Fewer respondents think they will lose their jobs over this next year. Only 18%, however, said their household incomes are significantly higher than they were last year. Clearly, spare cash is sparse and home prices are rising faster than incomes.
Doug Duncan, the senior vice president and chief economist with Fannie Mae, said, “Consumer attitudes are resilient during this spring-summer buying season. However, the upward trend in the good-time-to-sell (scenario prevalent) since last spring has done little to release more for-sale inventory. Having the tightest supply in decades combined with rising mortgage rates from historically low levels, will likely remain a hurdle for mobility and a persistent headwind for home sales.”
Demand for housing continues to rise as Millennials, now the largest demographic, move into their home-buying years. The problem many Millennials have is that housing supply is the lowest on the low end or first time buyer’s end of the market.
Some Millennials have been able to skirt that low end by buying their first homes in the “move-up” section of the market but…and this is a big but…Millennial homeownership fell in Q1 2018, according to the US Census, after rising throughout the entirety of 2017. Perhaps there aren’t as many “move-up” Millennial buyers as we thought.
