Optimism about the current housing market may depend on your pick for president. A new report from Trulia is based on two surveys about the housing hopes and fears of Americans — one was taken “before” the election and one taken “after”.
Trulia says the presidential election has resulted in large amounts of both optimism and pessimism among consumers about the housing market. And what you are feeling largely depends on whether you are a so-called “Discouraged Democrat” or a “Revived Republican”.
In addition to market expectations before and after the election, the report also covers the expectations of homeownership, especially among millennials; roadblocks to homeownership; and best markets for 2017 based on five key metrics, including the fact that these cities all have a large share of Republicans.
So buckle up for a ride through some housing market sentiment based on your political point of view!
Trulia typically does one annual survey to gauge consumer outlook for the housing market. But this year, it gathered information from two online surveys by Harris Poll. One was conducted from October 26th through the 28th, before the election. The other was conducted from November 15th through the 17th, after the election. The purpose, of course, was to find out whether consumers felt differently about the year ahead depending on the election outcome.
And, the impact of the election is quite noticeable.
When asked about buying a home this year, Republicans went from a -9 point margin before the election to a +17 point margin afterward. That’s a 26-point swing. For selling a home, Republicans swung 30 points, from a -5 point margin to a +25 point margin. Trulia says they went from being a little bearish when they thought Hillary Clinton would win, to substantially bullish when Donald Trump seized the election.
It was a similar scenario for Democrats, in reverse. They went from bullish to bearish for buying a home with a +13 point margin before and a -10 point margin after the election. And for selling a home, they went from a +17 point margin to a +1 point margin.
They were still a tiny bit bullish on selling a home, but they turned negative on buying a home, getting a mortgage, refinancing a mortgage, and on renting. Republicans swung to the side of optimism in all five categories.
Trulia also looked at the “dream of homeownership” and found that millennials took the biggest hit in that category. It says their homeownership dreams have fallen more than any other age group. In November 2015, 80% of them were dreaming about homeownership. Trulia says that number dropped to 75% before the election and 72% after the election. Trulia says the decline probably doesn’t have much to do with the election however, but rather a complex set of obstacles.
They are not scrapping their plans for homeownership since. 83% still plan on buying a home. But 72% of Millennials said they probably won’t do so until the end of 2018, at the earliest. So according to this reading of millennial intentions, we may not see much buying power from that age group this year.
Trulia also did a little digging into the biggest obstacles preventing homeownership. and “saving for a down payment” was clearly the most difficult part of the process. Working down the list, consumers said that poor credit history was next, followed by mortgage qualifications, rising home prices, other debt, not having a stable job, rising mortgage rates, and a limited inventory of homes for sales, presumably “affordable” homes.
I wonder if these people know that the FHA, Fannie and Freddie all offer 3.5% down payment programs? And the FHA allows borrowers with lower credit scores to qualify. If you are an agent or property seller, be sure to educate potential buyers on their financing options. Also, in about 60% of the country, its’ still cheaper to own than to rent.
Trulia says that mortgage rates would have to more than “double” where they are now to make the cost of buying a home more expensive than renting. So it doesn’t expect that a few minor increases in mortgage rates will have much affect on the housing market.
It said in some markets where home prices are really low, like Houston and Philadelphia, the mortgage rate would have to hit 14% to affect the financial advantage of homeownership in those cities. Even in more expensive cities, like Honolulu and San Jose, California, it said mortgage rates of 5.3 and 5.4% respectively, would make renting and buying about equal. The difference in those areas is that you need a much larger down payment – which prices out many potential buyers from qualifying.
Let’s get back to those election results: Trulia says it expects the “Bargain Belt” metros to catch up to the “Costly Coasts” because Bargain Belt areas are full of “revived” Republicans. The Costly Coasts are full of discouraged Democrats. That opinion is apparently based on the optimism being felt by those revived Republicans right now.
They say the top ten metros to watch this year have a large share of Republicans. And, five of the cities on the list are in Florida.
Topping the list is Jacksonville, Florida. Trulia says the inbound search activity is high meaning that people looking to move to Jacksonville are pouring through the listings. It also ranks 6th in the nation for job growth with a 3.8% job growth rate last year. Weather for all Florida cities is, of course, a big draw.
A local real estate agent told Forbes: “There’s long-term economic stability here plus great schools, fantastic weather, and proximity to the ocean.” He says: “There are so many people moving here and very little leaving.”
Cape Coral-Fort Myers, Florida is next on the list. It’s not as affordable as Jacksonville, but has even stronger job growth and a big drop in vacancy rates last year. It’s also home to the Boston Red Sox and the Minnesota Twins for spring training. That delivers a big boost to the economy every spring.
Deltona-Daytona Beach-Ormond Beach, Florida is third. Like Jacksonville, it has a strong influx of new residents along with strong job growth but is less affordable. Forbes says the area is “not” prone to strong winds, or hurricanes.
The list continues with Grand Rapids, Michigan; Tampa-St. Petersburg, Florida; Colorado Springs, Colorado; Charleston, South Carolina; San Antonio, Texas; Phoenix, Arizona; North Port-Sarasota-Bradenton, Florida.
Trulia also posted a list of metro areas with the largest share of Trump voters. They are Knoxville, Tennessee; Greenville, South Carolina; Tulsa, Oklahoma; Birmingham-Hoover, Alabama; Wichita, Kansas; Cape Coral-Fort Myers, Florida; Oklahoma City, Oklahoma; Forth Worth, Texas; Jacksonville, Florida; Winston-Salem, North Carolina.
Cities with the lowest share of Trump voters are San Francisco, Oakland, and San Jose, California, followed by Philadelphia, Pennsylvania; Los Angeles, California; Seattle, Washington; El Paso, Texas; Washington, D.C.; Silver Spring, Maryland; and Madison, Wisconsin.
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