Homebuyer Confidence Ticks Upward

SEATTLE-For the first time in nearly two years, homebuyer confidence has begun increasing, residential brokerage Redfin reported this week. By the same token, though, the firm said its survey of homebuyers found that many of them may have unrealistic expectations about mortgage rates.

“With fewer people shopping for homes as the holidays approach, buyers that remain in the market are enjoying greater negotiating power and lower competition than they have seen all year,” says Redfin economist Ellen Haberle. “This confidence boost won't last long, however. Our survey this month revealed that many buyers hold wildly unrealistic mortgage rate expectations. As rates rise in 2014, many will face a tough adjustment.”

The survey was conducted among 518 homeuyers across 22 US markets in late November. After three consecutive quarters of decline, 28% of survey respondents said now was a good time to buy a home, compared to 24% in the third quarter, the first time the figure rose since the first quarter of 2012. By the same token, just 46% of survey respondents said that now is a good time to sell, a sharp decline from Q3's figure of 63%.

Sixty percent of respondents cited low inventory as their top concern about buying this year, followed by 52% who chose rising prices. Eighty-five percent said mortgage rates were important in their home-buying decision, while 53% defined “normal” mortgage rates for a 30-year, fixed rate loan to be in the 4% to 5% range. In reality, mortgage rates for 30-year loans have averaged 6.7% since 1990.

Earlier this month, Redfin reported that although homebuyer demand declined in November, as buyers began to switch their focus toward the holiday season, the decline was less significant than last year. The company's agents reported that buyers were highly motivated this November, due in part to having more time to shop for a home on account of a late Thanksgiving.

The still-fitful recovery in the residential sector figured in recent comments from Matt Slepin, founder and managing partner of Terra Search Partners. “The national employment data show the spotty nature of the recovery,” Slepin told GlobeSt.com. “According to the US Labor Department, in residential building, the number of employed people has risen from its recessionary low of 555,300 in January of 2011 to 593,200 in the preliminary estimate for October, still well below the pre-recession peak of 1.022 million in April of 2006.”

Likewise, in non-residential building, “employment has risen from a recessionary low of 644,000 in February, 2011 to 686,300 in the preliminary estimate of 686,300 for October, down from a peak of 847,200 in March of 2008,” continued Slepin. “Similarly, in the Labor Department's real estate and rental and leasing category, employment rose from a low of 1.91 million in January '11 to an estimate of slightly more than 2 million in October, down from nearly 2.175 million in April, 2007.”