ShareNote: this is the first part of a three-part article on consumers’ views towards home buying and home ownership over a nine-year period.
NAR has produced the Market Pulse survey from 2003 through 2011. The survey was uniquely positioned to measure changes in consumers’ views towards home buying and home ownership during a period of dramatic change. The housing market reached a peak of sales in 2005 and prices in 2006 before the median home price fell nearly 30%. Since then, the market has gone through pains dealing with a backlog of foreclosed and distressed homes as well as changes to the structure of the mortgage finance system. With the housing market now inching upward from its bottom it is time to take stock of trends in the survey over the last nine years.
Concern about housing affordability rose in lock step with prices which accelerated though 2005. Respondents’ worry peaked in 2005 at 51% indicating that it was a very big or fairly big problem.
Survey respondents indicated that housing affordability declined sharply as a concern after 2007 reaching 38% by 2011. The sharp decline in both home prices and mortgage rates from 2007 to 2011 did much to ameliorate concerns about affordability. NAR’s housing affordability index, which looks at the median priced home relative to the median income and average rate for a 30-year fixed rate mortgage, rose 60% over this time frame.
While affordability proved a boon to consumers during the housing recession, job layoffs and rising unemployment pushed to the forefront of their concerns. The share of respondents that indicated an elevated level of concern, signifying it was either a very or fairly big problem, jumped from 33% in 2007 to 43% in 2008 and peaked at 60% in 2010. Over that time-frame the unemployment rate rose from 4.6% to 9.6%, while layoffs surged and incomes stagnated or declined. These concerns materialized in the form of lower consumer confidence and a decline in household formation, both of which weighed on home sales.
NAR’s Market Pulse survey has explored a number of trends in the housing market over the nine years. In the next piece of this three-part series, we’ll look at the impact that changes in the market hand on consumers’ perception of the home purchase choice and at the timing of the purchase.