TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/595032
Th e M Rep o RT | 53 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t the latest ANALYTICS consumer confidence in Housing market edges Up The uptick in confidence was largely due to rising home prices and positive attitudes toward selling a home. c onsumer confidence in the housing market rose in September nearly to its record high, driven mostly by positive sellers' attitudes and home price strength. Fannie Mae's Home Purchase Sentiment Index (HPSI) rose to 83.8 for the month of September following a two-month decline and is up 3 points from August. The index showed that four of the six survey components posted net positive gains. The Good Time to Sell component increased 13 points in September compared to the prior month, with 52 percent indicating it was a good time to sell, up 5 percentage points from last month. "The HPSI returned near its record high this month, driven primarily by improvement in at- titudes about selling a home and strengthening home prices," said Doug Duncan, SVP and chief economist at Fannie Mae. The Good Time to Buy com- ponent increased three points as rising rental prices may be pushing more consumers toward purchas- ing a home. Of those surveyed, 64 percent indicated it was a good time to buy a home in September, up 1 percentage point from August. "With consumers' expectations for rental price increases continuing to outpace their expectations for home price growth, many consum- ers may view homeownership as a more attractive option," Duncan said. "This should have positive implications for the housing market, which remains well below historical norms in relation to housing starts." Fannie Mae also found 45 percent of respondents say home prices will increase over the next year, while 9 percent indicated prices will lower. Fifty-five per- cent of respondents noted that mortgage interest rates will go up in the next 12 months, while 5 percent said they would go down. "Although net home price and mortgage rate expectations dipped in September, consumers' confi- dence in their employment and financial situations climbed 2 and 3 points, respectively, further sug- gesting a possible firmer footing for housing," the report said. When questioned about job security, 84 percent shared that they are not concerned with los- ing their job, while 15 percent are. Approximately 28 percent of those questioned reported higher income than last year, and 13 percent reported lower income. "We noted last week that, de- spite a relatively dismal jobs report, the addition of 8,000 construc- tion jobs, the biggest gain in four months, may be a sign of grudg- ing progress for the supply side of housing," Duncan said. "The September HPSI data, combined with the recent increase in con- struction jobs, are consistent with our expectation for a continued upward grind in housing." Home Prices not sole Factor in determining affordability Lower-priced markets often align with lower salaries, but incomes vary widely by region, even when comparing the same occupation, according to a new market study. H ome prices are not the only determining factor when looking at afford- able living options. In fact, markets with the cheapest homes are not necessarily always the most affordable. Zillow research released in October showed lower priced homes are not always the most at- tractive and budget-friendly option for those in the U.S. workforce. Although homes cost less in the middle of the country, wages are also lower. Consumers who live there also put a smaller percentage of their monthly income toward housing. Thus, even though homes are cheaper, they are not necessarily more affordable to area residents, the study found. "There's a lot more to home buying affordability than just the cost of the home. Incomes vary a lot across the country—even within the same occupation," said Dr. Svenja Gudell, chief economist at Zillow. To prove this point, Zillow compared the affordability of homes for different occupations across the nation. Teachers that are budgeting to purchase a home in the future will have a harder time finding a home in Salt Lake City, Utah or Portland, Oregon than in some parts of California, Zillow found. Zillow found that in Bakersfield, California, the median home value is $166,300, while the annual teacher salary is $61,000. If 22 percent of this income is applied toward a house payment, a teacher in this area could afford a $310,000 home, which includes about 86 percent of all homes on the market. In contrast, a teacher in Salt Lake City, Utah makes $38,000 annually and can afford a $195,000 home, only about 25 percent of homes in this market. Riverside, California firefight- ers can purchase a $653,000 home, with the median local firefighter income of $107,000 and spending the average 26 percent to pay their mortgage, Zillow said. Meanwhile, Portland, Oregon construction workers will find less than 10 percent of listings within their budget, but they can afford almost two- thirds of the homes for sale in Buffalo, New York. "There's also the question of how much of your paycheck you're willing to put toward a house payment, and finally, whether you can find a home in your price range," Gudell said. "Many potential buyers are check- ing all the right boxes prior to buying a home—saving a healthy down payment, organizing fi- nances and qualifying for a loan— only to find there are few homes available within their budget and close to their job." Approximately 28 percent of those questioned reported higher income than last year, and 13 percent reported lower income.