The ZIllow Housing Confidence Index recently revealed that there is strong demand for housing in 2014, especially among first-time buyers looking to exit the rental market. And while the report notes there will be headwinds for buyers - low levels of inventory, increasing mortgage rates and waning affordability in certain areas - as a whole, the upcoming buying season will see a lot of activity.
"For the housing market to continue its recovery, it is critical that homes are both available and remain affordable to meet the strong demand these survey results are predicting, particularly from first-time homebuyers," said Zillow Chief Economist Stan Humphries. "Even after a wrenching housing recession, this data shows that the dream of homeownership remains very much alive and well, even in those areas that were hardest hit. But these aspirations must also contend with the current reality, and in many areas, conditions remain difficult for buyers. The market is moving toward more balance between buyers and sellers, but it is a slow and uneven process."
According to the data, in 19 of the 20 large metropolitan areas, more than 5 percent of residents said they wanted to buy a home in the new year. In addition, 10 percent of renters said they wanted to buy a home. The report notes that if all these renters were to actually make a purchase in the next year, it would translate to 4.2 million first-time home sales, doubling the number of first-time homes sales last year. However, experts note that certain markets are already unaffordable for buyers, especially first-time buyers.
"While it is reassuring to see all of the headline ZHCIs in positive territory, the underlying indicators of homeownership aspirations, housing market conditions and expectations for each metro area and tenure segment reveal significant variability," said Terry Loebs, founder of Pulsenomics, which developed the ZHCI. "Several of these drivers of overall housing confidence registered negative or only marginally positive readings in some cities. These data confirm that real estate recovery and economic healing are relative, local phenomena, and in some instances, likely reflect the lingering psychological impact of the housing bust."
Mortgage rates also up
Freddie Mac's latest Primary Mortgage Market Survey showed that mortgage rates increased in the week ending March 3.
According to the report, a 30-year fixed-rate averaged 4.37 percent, up from 4.28 percent a week before. At the same time a 15-year fixed-rate mortgage average 3.38 percent, up from 3.32 percent a week ago.
"Mortgage rates edged up amid a week of light economic reports," said Frank Nothaft, vice president and chief economist at Freddie Mac. "Of the few releases, the economy added 175,000 jobs in February, which was above the market consensus forecast and followed an upward revision of 25,000 jobs for the prior two months. Meanwhile, the unemployment rate nudged up to 6.7 percent, the first rate increase in over a year."
While mortgage rates increased in the latest survey, they still remain affordable and many first-time buyers will make a purchase in the next year.
The importance of an inspection
First-time homebuyers will flock to the housing market in the next year. As a result, those who are new to the homebuying process are reminded of the importance of a home inspection.
A reputable home inspector will educate a buyer on every important aspect of a home. First-time buyers will find that this information is helpful in giving them the confidence they need to sign a purchase agreement. Whether it's pointing out issues with a home or just learning more about the property, a home inspection is critical aspect of the overall process.