Press Release

Home Price Growth Expectations Increase; Renters Perceive Easier Access to Mortgage Credit

May 11, 2017

NEW YORK – The Federal Reserve Bank of New York today released results from its February 2017 SCE Housing Survey, which provides information on consumers' housing-related experiences and expectations. The survey, which is part of the broader Survey of Consumer Expectations (SCE), shows an increase in home price growth expectations, especially for growth over the next year. The majority of households continue to view housing as a good financial investment. Expected changes in mortgage rates have slightly increased since last year’s survey, and renters’ perceived access to mortgage credit has continued to ease.

This latest survey marks the fourth installment of the SCE Housing Survey, which has been fielded annually since 2014. More detailed results are available in the SCE Housing Survey interactive web feature, which presents trends of key variables and various demographics over time. In addition, a detailed background report describes the sample and presents summary statistics for a larger number of questions.

Key findings from the February 2017 Survey are:

Home Prices/Rents

  • Average home price change expectations at both the one- and five- year horizons increased from 2016. For example, the mean one-year ahead expected change in home prices in 2017 was 5.1%, which is 1.8 percentage points higher than last year and the highest level since the inception of the survey in 2014. Five-year growth expectations also increased from last year, but remain at or below the levels in 2014 and 2015.
  • There was a drop in the perceived downside risk in home prices over both the one- and five-year horizons. At the one-year horizon, the average probability of home prices decreasing declined from 43% in 2016 to 37.5%.
  • Rent change expectations increased at both the 1- and 5- year horizons, by 0.8 and 0.5 percentage points, respectively. 

Housing Outlook

  • Attitudes toward housing continued to remain positive: 60.4% of all respondents think that buying property in their zip code is a very or somewhat good investment, and 12.7% think it is a bad investment. Although slightly less optimistic than respondents overall, most renters are also enthusiastic about buying property, with 55.9% viewing it as a good investment and 15.6% viewing it as a bad investment. Higher-income (annual income of $60,000 or more) and more educated (a Bachelor’s degree or more) households continue to have a more optimistic outlook of housing compared to their counterparts.
  • The average probability of buying a home, conditional on moving within the next three years, was largely unchanged from 2016 at 63.6%. The average probability of moving over the next year declined slightly, from 19.2% to 17.8%.

Mortgage Rates

  • On average, households perceive mortgage rates for themselves and nationally to have increased by about 40-50 basis points from 2016. This change is roughly in line with the increase in actual mortgage rates. Less-educated and lower-income households perceived larger increases.
  • Average expectations of future mortgage rates similarly increased for both the one- and three-year-ahead horizons. For example, the average year-ahead mortgage rate expectation was 5.6%, up from 5.2% in 2016. The average probability that mortgage rates will increase over the next year rose from 49.5% in 2016 to 52%; this is primarily driven by older respondents (ages 50 or older).

Owners

  • The average probability of mortgage refinancing over the next year declined to 10.2%, from 11.3% in 2016.
  • The average probability of investing at least $5,000 in the home over the one- and three-year horizons remained steady. The average probability for the one-year horizon stands at 32.4%; the corresponding value for the three-year horizon is at 46%.

Renters

  • Renters continue to perceive obtaining a mortgage (if they want to buy a home) as difficult, with 65% stating that it would be somewhat or very difficult to get a mortgage. However, renters are gradually beginning to perceive credit access as becoming easier. For instance, this year 20% of renters stated it would be somewhat or very easy for them to obtain a mortgage if they wanted to, compared to fewer than 15% in 2014 and 2015. These movements held across demographic groups, although they are less pronounced for older renters.
  • Renters continue to report a strong preference for owning homes. The share of renters who report preferring or strongly preferring to own instead of rent (if they had the financial resources to do so) stood at 72.3%, a slight decrease from 74.1% in 2016. Younger and less-educated respondents are particularly likely to express a strong preference for owning.

 

About the SCE Housing Survey

The SCE Housing Survey, fielded annually as part of the SCE (Survey of Consumer Expectations), provides rich and high-quality information on consumers’ experiences, behaviors, and expectations related to housing. The survey, among other things, collects data on households’ home price growth perceptions and expectations; intentions regarding moving and buying a home in the future; and perceptions of credit conditions. For homeowners, the survey collects detailed information on their mortgage debt, past actions and experiences such as foreclosure or refinancing, and expectations regarding future actions, such as taking out new debt or investing in the home. For renters, among other things, the survey elicits preferences for owning versus renting, and perceptions regarding the ease of obtaining mortgage credit.

More information about the SCE survey goals, design, and content can be found here.

Contact
Betsy Bourassa
(212) 720-6885
betsy.bourassa@ny.frb.org