Consumers are becoming increasingly confident about economic conditions—thanks to steady job gains and rising home values —but REALTOR® confidence in the housing market in September fell to its lowest mark in two-and-a-half years, according to the latest REALTOR® Confidence Index. Pending contracts to buy a home have been on the rise in recent months, although they’re still lower than year-ago levels.
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“Unless REALTORS® are expressing their sentiment based on intangible factors, like changes in the number of client appointments or lower foot traffic at open houses, the weakening confidence by REALTORS® seems uncalled for,” writes Lawrence Yun, NAR’s chief economist, at the Economists’ Outlook blog.
The REALTOR® Confidence Index—measuring current conditions, the six-month outlook, and buyer and seller traffic—fell among all three measures in September month-over-month, and was also down compared to the same time last year.
“REALTORS® continued to report about the difficulty of qualifying for a loan under more stringent credit eligibility standards,” according to the report. “Although mortgage rates continue to be the lowest in decades and homes are still more affordable today compared to the years prior to the Great Recession, REALTORS® reported that there are fewer ‘affordable’ homes for sale for the first-time buyer. Adding an extra financial burden is the effective increase in insurance payments for FHA-insured loans. Obtaining FHA financing for condominiums that are the entry points for home ownership has also remained a challenge.”
The report also notes the decrease in distressed properties in many markets are providing fewer options for first-time home buyers. As such, first-time home buyers are accounting for less than a third of the market, and are at their lowest level in decades.
Nevertheless, with rising inventories and an expectation of demand growth, the majority of REALTORS® surveyed still expected a modest increase—about 3 percent—in home values over the next 12 months. REALTORS® in Texas, Florida, Hawaii, and Washington, D.C., are the most optimistic, expecting prices to grow at or above 5 percent over the next year.