Millennial renters and Americans overall have become more optimistic about the housing market since January, according to Zillow.
Zillow’s Housing Confidence Index, measured on a scale of 0-100, rose to 64.2 over the summer, up from 63.7 in January, in 11 of the country’s 20 major metro areas. But data based on a survey of 10,000 consumers also reveals significant differences by age group.
The improvement was “buoyed by optimism among millennials” despite more tempered overall expectations about future housing market performance, Zillow finds.
Up to 82% of millennial renters (aged 18-34) said they were confident or somewhat confident they will be able to afford to own a home someday. By comparison, 64% of Generation X renters (aged 35-49) and only 48% of baby boomer renters (aged 50-64) were as optimistic. At 33%, millennials also were far more optimistic about future home value appreciation, compared to 21% of Generation Xers and 15% of baby boomers.
“It’s heartening to see younger renters express so much confidence in their ability to buy a home in coming years,” said Zillow Chief Economist Stan Humphries. “Cynics might argue that these results represent no more than youthful exuberance, or perhaps some naivet, but that’s missing the point. We need this generation to be confident and wanting to buy, regardless of the difficulties they faceoptimism is a necessary first step.”
Overall the Housing Market Conditions Index, a measure of prevailing buying and selling trends, rose to 62.1 up from 60 in January, while the Homeownership Aspirations Index increased to 62.7 from 62.4.
At the same time consumers’ expectations on changes in home values and affordability, measured by the Housing Expectations Index, fell to 66.1, down from 66.3 in January in line with Zillow’s expectations to see “slower home value growth over the next year.” Zillow’s Home Value Forecast shows home values will increase 3.1% through August 2015, or nearly half of expectations to see a 6.6% increase over the past year.
Zillow’s comparison of housing market sentiment of homeowners and renters show that overall, housing confidence is higher among homeowners than renters, likely owing to historically high rents and favorable home buying conditions.”
Yet across generations, data in 14 of the 20 major metro areas in the research show “a majority of renter households don’t believe that right now is a good time to buy a home,” said Terry Loebs, founder of Pulsenomics, which developed the indices.