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Is the Market Cooling Just in Time for Winter?

Nov 14, 2018 1:29:45 PM

Is the Market Cooling Just in Time for Winter?

Millennial homeowners are among those most eager to sell before prices fall, signaling more starter homes could enter the market, according to ValueInsured's Modern Homebuyer Survey.

Signaling a shift in market perceptions, 75 percent of Americans believe their local housing market is "cooling off," and most (72 percent) say they are not surprised, according to results from ValueInsured's Q4 2018 Modern Homebuyer Survey, released Nov. 13.

3 in 4 Americans report their housing market has cooled

Three Out of Four Americans Report Their Housing Market Has Cooled

This follows five consecutive quarters where the majority of Americans believed housing was overheated.  Among states with the most robust home sales activity, 22 percent of residents in California, 19 percent in Colorado, 36 percent in Texas, and 22 percent in Washington say their local market is not cooling.

The ValueInsured Housing Confidence Index registered at 63 on a 100-point scale for all Americans in Q4, down 4.7 points in one year. Homeowners, historically the most confident segment on the index, produced a score of 71.6 in Q4, the second-lowest level recorded in 30 months.

The report indicates millennial homeowners are among the most bearish:

  • 72 percent report home shoppers in their neighborhood are less aggressive now compared to one year prior
  • 67 percent expect a home bought in their neighborhood today will likely decrease in value one year from now

A Shift from Seller's to Buyer's Market

Millennial homeowners' outlook signals the starter-home seller's market may have peaked. Seventy-eight percent believe now is a good time to sell; however, only 38 percent of those who wish to buy a starter home in the near future believe now is a good time to buy–down 8 points in one year. This is meaningful, as starter-home owners' hesitancy to sell and the subsequent inventory drought had been a key catalyst that drove up home prices in many major markets in recent years.

"The ValueInsured Survey revealed some concerning evidence about the changing psychology of the housing market," said Robert Shiller, a Nobel Prize-winning economist. "We will be watching these numbers as they unfold over the future."

From Bidding Wars to Waiting It Out

Despite observing market adjustments, 72 percent of all Americans and 78 percent of urban residents believe home prices are still too high. The latest data represent 10-point and 13-point increases, respectively, from Q2 2018. Urban homeowners in particular blame "flippers and speculative investors" (70 percent) and "wealthy transplants from more expensive housing markets" (66 percent) for inflating their local home prices to unsustainable levels.

Theories for what inflated home values aside, many prospective homebuyers now plan to wait it out before pulling the trigger:

  • 59 percent of all interested homebuyers (including first-time and upgrade buyers) say they plan to wait for a "meaningful correction" before buying
  • 14 percent plan to drop out of buying altogether if a correction does not occur

"In August 2017, ValueInsured was among the first to report Americans' concerns about overheated housing and a possible correction," said Joe Melendez, CEO and founder of ValueInsured. "Fast forward 15 months, Southern California is in its worst housing slump in over a decade, Seattle leads the nation in fastest home-price drop, and North Texas has the largest sales decline in seven years. Buyers have switched from hoop jumpers to bargain-hunter mode. Expect the market to stall in the near term."

View associated infographic and details at valueinsured.com/trends.

See valueinsured.com/insights for survey methodology.

About ValueInsured
Dallas-based PVI Agency, LLC dba ValueInsured, is the only provider of home down payment and refinance equity protection. The innovative products give homeowners greater control and flexibility to sell their home, protect their down payment and accumulated home value even in a down market. ValueInsured's +Plus down payment and equity protection programs are available on mortgages across the U.S. and are backed by one of the world's largest re-insurance companies, with more than $8 billion in capital. See policy details and +Plus availability at valueinsured.com.

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