Settling in For a Winter Chill? Housing Market Confidence in the Northeast
Part 2, focused on the South, can be found here.
Part 3, focused on the Midwest, can be found here.
Part 4, focused on the West, can be found here.
Housing market confidence improved modestly in the Northeast in the latter part of the year, but remains below the rest of the country, according to the most recent Zillow Housing Confidence Index. Renter expectations about how housing markets will evolve over the next year is also lower in the Northeast than elsewhere in the country.
The Zillow Housing Confidence Index, sponsored by Zillow and developed and administered by Pulsenomics LLC, offers unique insight into homeowners’ and renters’ intentions and attitudes about the housing market, and provides a gauge of housing market health looking forward. It is based on more than 10,000 interviews in 20 real estate markets.
The ZHCI is measured on a 0 to 100 scale, with readings above 50 indicating positive sentiment. The headline index is comprised of three sub-indices:
- The Housing Market Conditions Index (HMCI), which measures prevailing market trends and buying/selling conditions.
- The Housing Expectations Index (HEI), measuring expected changes in home values, home affordability and the value of homeownership.
- The Homeownership Aspirations Index (HAI), which measures household home-buying plans and attitudes toward the social value of homeownership.
Below is a detailed breakdown of homeowner and renter confidence in the Boston, New York, Philadelphia and Washington, D.C., metros.
Homeowner Confidence Remains Boston Strong
- Housing market confidence moved higher in Boston in 2014 Q2, but homeowners are feeling better than renters.
- Renters’ homeownership aspirations deteriorated slightly. Still, 9 percent of renters said they expect to buy a home in the next year.
- Racial and ethnic minorities in Boston tend to hold traditional social views on housing, while whites tend to be more optimistic about the financial returns to homeownership.
Housing market confidence improved in the Boston metro area over the summer, driven by homeowners’ and renters’ improving assessment of current market conditions. However, renters’ homeownership aspirations deteriorated slightly, with the Homeownership Aspirations Index (HAI) among Boston renters well below the index level for the nation as a whole.
Survey respondents said they expect home values to increase by about 3.6 percent over the next year in the Boston metro area. Zillow’s September 2014 Home Value Forecast projects a 0.3 percent increase over the next year, compared to a 5 percent increase in home values over the past year. When asked to estimate how much home values had increased over the past year, survey respondents said 4.2 percent, on average. More housing data for the Boston metro area are available here.
About two-thirds (64 percent) of all Boston-area renters said they are “confident” or “somewhat confident” that they will eventually be able to buy a home. But among young adults age 18 to 34, the share is much higher, at 81 percent. Over the next year, 9 percent of renters said they expect to buy a home. If these plans come to fruition, it would translate into about 130,000 new homeowners in the Boston area.[1] An additional 24 percent of renters said they plan to buy a home one to two years in the future, which would translate into about 310,000 new homeowners between mid-2015 and mid-2016.
When asked whether housing is the best long-term investment a person can make, there were substantial differences in the responses across race/ethnic groups in the Boston area. Among whites, 68 percent said they think housing is the best long-term investment, compared to 55 percent of Asians, 54 percent of blacks and 50 percent of Hispanics. Despite higher skepticism about the financial returns to housing, racial and ethnic minorities tend to hold more traditional social views on homeownership. Among Asians, 57 percent said that owning a home is necessary to be a respected member of society, compared to 43 percent each among Blacks and Hispanics and just 29 percent among whites.
Renter Aspirations on Ice in New York
- Housing market confidence improved slightly in New York over the summer, but confidence moved in opposite directions for owners and renters.
- About 10 percent of New York renters said they expect to buy within the next year, which would translate into about 820,000 new homeowners.
- Young adults in New York tend to be skeptical about the financial returns to homeownership, but remain very optimistic about its social benefits.
Housing market confidence edged up slightly in the New York metro area in the summer compared to earlier in the year, although the sub-indices for renters and owners moved in opposite directions. Homeowner confidence about the current state and future direction of the housing market improved, but renter confidence deteriorated, driven primarily by their expectations for how housing markets will evolve over the next year.
Survey respondents said they expect home values to increase by about 3.1 percent over the next year in the New York metro area. Zillow’s September 2014 Home Value Forecast projects a 1.6 percent increase over the next year, compared to a 5.5 percent increase over the past year. When asked to estimate how much home values increased over the past year, survey respondents said 3.5 percent, on average. More housing data for the New York metro area are available here and via StreetEasy.
About two-thirds (64 percent) of New York-area renters said they were “confident” or “somewhat confident” that they will eventually be able to buy a home. But among young adults age 18 to 34, the share is much higher at 88 percent. Ten percent of renters said they expect to buy a home within the next year. If these plans come to fruition, it would translate into about 820,000 new homeowners in the New York metro area. An additional 31 percent of renters said they plan to buy a home one to two years in the future, which would translate into about 2.3 million new homeowners between mid-2015 and mid-2016.
Young adults in the New York area are skeptical when it comes to the financial returns to homeownership, but they still hold very traditional views on the social benefits of homeownership. Among New York-area millennials (age 18 to 34), only 59 percent think that housing is the best long-term investment a person can make, compared to 65 percent of New York-area Baby Boomers (age 50 to 64). However, when asked whether owning or renting provides a person “more freedom,” 79 percent of millennials answered “owning,” compared to 59 percent of Baby Boomers. Similarly, 54 percent of millennials said they believe owning a home is necessary to be a “respected member of society,” compared to 35 percent of Baby Boomers.
No Brotherly Love for Philadelphia Homeowners
- Housing market confidence edged up in Philadelphia, but remains the weakest in the nation.
- Over the next year, 6 percent of Philadelphia renters said they expect to buy a home, which would translate into about 90,000 new homeowners.
- Hispanics in the Philadelphia area are more optimistic about homeownership than other racial and ethnic groups.
Housing market confidence edged up slightly in the Philadelphia metro area over the course of 2014, but remained the weakest among the 20 metro areas surveyed. Homeowners’ and renters’ assessments of current market conditions improved, but homeowners’ expectations for the trajectory of the market over the next year and their homeownership aspirations deteriorated from earlier in the year. The sub-indices for owners and renters moved in opposite directions, with the aggregate index for renters improving sharply while the aggregate index for owners fell.
Survey respondents said they expect home values to increase by about 1.5 percent over the next year in the Philadelphia metro area. Zillow’s September 2014 Home Value Forecast projects a 2.5 percent increase over the next year, compared to a 5.2 percent increase over the past year. When asked to estimate how much home values increased over the past year, survey respondents said 1.5 percent, on average. More housing data for the Philadelphia metro area are available here.
About two-thirds (64 percent) of Philadelphia-area renters said they are “confident” or “somewhat confident” that they will eventually be able to buy a home. Among young adults age 18 to 34, the share is somewhat higher—69 percent—and it is highest (77 percent) among adults age 35 to 49. Over the next year, 6 percent of renters said they expect to buy a home. If these plans come to fruition, it would translate into about 90,000 new homeowners in the Philadelphia metro area. An additional 20 percent of renters said they plan to buy a home one to two years in the future, which would translate into about 300,000 new homeowners between mid-2015 and mid-2016.
In the Philadelphia area, Hispanics are much more optimistic about the housing market than other racial and ethnic groups: 81 percent of Hispanics said they believe that buying a home is the best long-term investment a person can make, compared to 64 percent of Asians, 61 percent of blacks and 60 percent of whites. Similarly, 79 percent of Hispanics said they agree that owning a home is necessary to “live the good life and the American dream” compared to 73 percent of Asians, 69 percent of blacks and 51 percent of whites. Despite these beliefs, Hispanic renters in the Philadelphia area have relatively low confidence that they will eventually be able to buy a home: Only 31 percent said they are “confident” or “somewhat confident” that they will eventually be able to afford a home, compared to 88 percent of black renters, 84 percent of Asian renters and 54 percent of white renters.
Washington, D.C., Confidence Hottest in the Northeast
- Housing market confidence increased in Washington, D.C., with confidence improving similarly for renters and owners.
- About 13 percent of Washington, D.C., renters said they expect to buy in the next year, which would translate into about 230,000 new homeowners.
- Young adults in the Washington, D.C., area tend to hold much more traditional views on homeownership than older adults.
Housing market confidence increased in the Washington, D.C., metro area over the summer, with almost all sub-indices moving higher. The one exception was renters’ assessment of current market conditions, which fell slightly. However, for both renters and owners, housing market confidence in the Washington, D.C., metro area remains higher than elsewhere in the Northeast.
Survey respondents said they expect home values to increase by about 2.1 percent over the next year in the Washington, D.C., metro area. Zillow’s September 2014 Home Value Forecast projects a 0.7 percent increase over the next year compared to a 5.6 percent increase over the past year. When asked to estimate how much home values had increased over the past year, survey respondents said 3.3 percent, on average. More housing data for the Washington, D.C., metro area are available here.
More than two-thirds (67 percent) of Washington, D.C.-area renters said they are “confident” or “somewhat confident” that they will eventually be able to buy a home. Among young adults age 18 to 34 the share is much higher, at 85 percent. Over the next year, 13 percent of renters said they expect to buy a home. If these plans come to fruition, it would translate into about 230,000 new homeowners in the Washington, D.C., metro area. An additional 19 percent of renters said they plan to buy a home one to two years in the future, which would translate into about 290,000 new homeowners between mid-2015 and mid-2016.
Young adults in the Washington, D.C., metro area hold very traditional views on homeownership, compared to older adults within the metro area and compared to young adults elsewhere in the country. Among millennials age 18 to 34, 69 percent said they believe that buying a home is the best long-term investment a person can make, compared to 60 percent of Baby Boomers (age 50 to 64) in the Washington, D.C., area and 65 percent of millennials nationwide. Similarly, 70 percent of D.C.-area millennials said they believe that owning a home provides a person more freedom than renting, compared to 58 percent of Baby Boomers. Among D.C.-area millennials, 69 percent said they agree that owning a home is necessary to “live the good life and the American dream,” compared to 52 percent of D.C.-area Baby Boomers and 65 percent of millennials nationwide. Finally, 47 percent of D.C.-area millennials said they believe that owning a home is necessary to be a “respected member of society,” compared to 31 percent of D.C.-area Baby Boomers and 46 percent of millennials nationwide.
[1] Estimate calculated by applying home purchase expectations from the Zillow Housing Confidence Survey to household tenure estimates from the 2012 American Community Survey. Figures are for individuals, not households.
Alex Hubbard assisted with the research and drafting of this brief.