NY Fed: Home Price Growth Expectations Decline, but Consumers’ Outlook on Housing Remains Positive

Federal Reserve Bank of New York

Home Price Growth Expectations Decline, but Consumers’ Outlook on Housing Remains Positive

The Federal Reserve Bank of New York today released results from its February 2016 SCE Housing Survey, which provides information on consumers’ housing-related experiences and expectations. The survey shows a modest decline in home price growth expectations. However, the majority of households still view housing as a good financial investment. Mortgage rate expectations have declined since last year’s survey, and renters’ perceived access to mortgages has become easier.

This latest survey marks the third installment of the Survey of Consumer Expectations Housing Survey, which has been fielded annually every February since 2014. With this release the New York Fed is also unveiling a new SCE Housing Survey interactive web feature, which presents time trends for variables of interest for the overall sample, as well as for various demographic groups.

The main findings from the February 2016 Survey are:

Home Prices/Rents

  • Average home price change expectations at both the one- and five- year horizons declined from the 2015 survey. For example, the mean one-year ahead expected change in home prices in the 2016 survey was 3.3 percent, nearly a full percentage point below the mean forecast in the 2015 and 2014 surveys. The declines were broad-based across income levels and across geographic regions.
  • There was a decline in the average probability of home prices increasing over both the one- and five- year horizons. At the one-year horizon, the average probability declined to 57.1 percent from 59.7 percent in the 2015 survey.
  • Rent change expectations remained steady at both the 1 and 5 year horizons.

Housing Outlook

  • Attitudes toward housing continued to remain positive: 59.2 percent of respondents think that buying property in their zip code is a (very or somewhat) good investment, and 13.2 percent think it is a bad investment. However, attitudes have become somewhat more polarized over the last three years: 21 percent of respondents think that housing is a very good investment (compared to 14 percent in 2014), and 2.9 percent think it is a very bad investment (compared to 1.3 percent in 2014).
  • The average probability of buying a home, conditional on moving within the next three years, rose to 63.0 percent from 59.9 percent in 2015. The increase was particularly pronounced for renters, whose average probability of buying their next home increased from 43.2 percent to 48.9 percent.

Mortgage Rates

  • On average, households perceive mortgage rates (for their own self as well as at the national level) to have declined by about 40 basis points from 2015. For example, the average perceived national mortgage rate in the 2016 survey was 4.7 percent, down from 5.1 percent in the 2015 survey.
  • Average expectations of future mortgage rates decreased for both the one- and three- year-ahead horizons. For example, the average year-ahead mortgage rate expectation was 5.2 percent, down from 5.6 percent in 2015. The declines were primarily driven by lower-income and less-educated household heads.

Owners

  • The average probability of mortgage refinancing over the next year declined slightly to 11.3 percent, from 11.9 percent in 2015.
  • The average probability of investing at least $5,000 in the home over the one- and three-year horizons increased. For example, the average probability for the one-year horizon rose from 26.2 percent in 2015 to 32.5 percent.

Renters

  • Renters continue to perceive obtaining a mortgage (if they wanted to buy a home) as difficult, with two thirds stating that it would be somewhat or very difficult to get a mortgage. However, there are signs of improved perceived credit access relative to previous surveys: the share of renters reporting that obtaining a mortgage would be (somewhat or very) easy rose to 17.5 percent (from 12.8 percent in 2014, and 14.7 percent in 2015). This held across all demographic groups.
  • Renters continue to report a strong preference for owning. The share of renters who report preferring or strongly preferring to own instead of rent (if they had the financial resources to do so) rose to 74.1 percent from 68.5 percent in 2015.

Detailed results are available here.

About the SCE Housing Survey

The SCE Housing Survey, fielded annually as part of the SCE (Survey of Consumer Expectations), provides rich and high-quality information on consumers’ experiences, behaviors, and expectations related to housing. The survey, among other things, collects data on households’ home price growth perceptions and expectations; intentions regarding moving and buying a home in the future; and perceptions of credit conditions. For homeowners, the survey collects detailed information on their mortgage debt, past actions and experiences such as foreclosure or refinancing, and expectations regarding future actions, such as taking out new debt or investing in the home. For renters, among other things, the survey elicits preferences for owning versus renting, and perceptions regarding the ease of obtaining mortgage credit.

More information about the SCE survey goals, design, and content can be found here.

SOURCE: https://www.newyorkfed.org

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