Trulia’s latest American Dream survey reveals that consumer optimism is rebounding– faster than the housing market itself is. Prospective homebuyers are looking at bigger homes, thinking more seriously about buying and optimistically hoping for higher home prices in both the short-term and long-term.
To get American’s take on homeownership, we worked with Harris Interactive to conduct an online survey of 2,205 U.S. adults between May 22-24 and 2,230 U.S. adults between June 4-6. For the full methodology, see here.
The Return of Super-Sized Homes
Remember when Americans started looking for smaller-sized homes after the bubble burst? Well, it turns out that downsizing was not here for good. After a few months of encouraging housing market news, the “bigger is better” way of thinking is making a comeback. Now, 27% of Americans say their ideal home size is over 2,600 square feet–up from 17% in 2011. Furthermore, the “super-sized” house category, 3,200 square feet and up, saw an even more dramatic increase in interest. While just 6% of those surveyed in 2011 expressed desire for a super-sized home, 11% now say they want a home of this size — that’s almost double a year ago.
It turns out that new-home builders spotted this growing appetite for size: the Census recently reported the average home constructed increased from 2,392 square feet in 2010 to 2,480 square feet in 2011.
Wanting a super-sized home is one thing, but getting it is another. Although newly constructed homes are getting bigger, most inventory is existing homes, including foreclosures, and the current inventory of for-sale homes skews smaller than most people’s ideal. Although 27% of Americans say they that their ideal home size is bigger than 2,600 square feet, only 22% of the currently listed homes on Trulia are actually that big. Meanwhile, the super-sized category –3,200-plus–is pretty much on the money, but the majority of available homes fall in the smaller size categories–800 to 2,000 square feet. That means many Americans may have to downsize their dreams to fit a smaller reality.
|Size (Square Footage)||Ideal (Survey)||Trulia Inventory|
|800 to 1,400||8%||29%|
|1,401 to 2,000||29%||29%|
|2,001 to 2,600||25%||17%|
|2,601 to 3,200||16%||10%|
|More than 3,200||11%||12%|
Note: An additional 11% of survey respondents answered “not sure” to the “ideal home size” question. An additional 4% of Trulia’s for-sale inventory is homes with less than 800 square feet.
Tomorrow’s homebuyers also have high hopes for amenities. In our survey, we asked current renters which amenities they would love to have in the first home that they buy. While the most desired features were a master bathroom (63%), a walk-in closet (56%) and a gourmet kitchen (50%), only 26%, 35% and 9% of actual home buyers reported having these respective features in the first home. For gourmet kitchens, that’s a 41% gap between expectations and reality: time to downsize those cooking fantasies! Consumers would be wiser to set their sights on the dream amenity that’s more likely to come true: wood floors, which 47% of renters want and 35% of buyers said they had in their first home.
|Real Estate Expectations vs. Reality: Hard Pill to Swallow|
|Amenity||Renter Dreams2||First-Time Homeowner Realities|
|En-suite master bathroom||62%||26%|
|Pre-wired entertainment system||31%||7%|
Renters Want to Buy, But Can They?
Even though the homeownership rate has dropped, more renters are now thinking about buying a home. Job growth, low interest rates and ever-rising rents have pushed up renter interest in home buying. Now, 78% of renters said that they plan to purchase a home someday, up from 72% in early 2011. More than a quarter of renters (27%) want to buy in the next two years, compared with 22% in 2011. That’s a big increase.
But obstacles remain. Still hung over from the housing bubble, those who wish to buy still face very serious hurdles to achieving their dream. Tellingly, 47% were concerned about being able to make a down payment, 32% said poor credit history could be an issue and 25% wondered if they would even qualify for a mortgage. Even though consumers may be more willing than ever to buy, they may be in for a rude awakening when it comes time to pull together a downpayment and apply for a loan.
Prices are going up, up…up?
With home asking prices up 1.6% quarter over quarter nationally, and in positive territory in 86 of the 100 largest metros (according to the Trulia Price Monitor), it’s not surprising that 61% of Americans think that home prices in their local market will rise in the next year. But – get this — 58% believe that local home prices will return to their previous bubble-level peaks within the next 10 years. For residents of Pittsburgh, Dallas and other metros where prices held up well during the bubble, it makes sense to expect prices to return to their previous high in the next ten years. But residents of the hardest-hit metros, like Detroit and Las Vegas, are almost as optimistic about future price increases.
Is this irrational exuberance? Maybe. In metros where prices skyrocketed during the bubble and then plummeted, today’s prices are a lot closer to “normal” than those bubble highs were. Perhaps residents in metros with huge price drops are encouraged by all of the search activity in those areas: we’ve pointed out that far more searchers are looking for homes in places that had bigger price declines than the other way around. But that doesn’t mean people should bet on their home values returning to those crazy heights.
It’s important to dream, and dream big – this is America, after all. And the major housing indicators support renewed optimism. In our December 2011 survey, consumers told us that (1) fewer defaults and foreclosures and (2) more sales would be the two trends that would give them the most confidence in housing market recovery, and both of those measures are improving. But while some optimism is necessary for the housing market to recover, the pendulum may have swung a little too far. Too much optimism would get us back to a bubble.
 We asked this question to renters about amenities in February 2012.
Jed hosted an industry call to discuss the survey findings and the current state of the housing market. To listen to the audio from the call:
To view a slideshow of the full survey results: