Homeowners More Confident Than Renters in the US



The latest research from Zillow shows that people who own their own homes in the US are generally more confident than renters in the performance of their local housing market. However confidence does vary widely and whereas the gap is likely to be bigger in areas seeing rapid growth in home values, it is narrower in those seeing lower growth.

Generally homeowners are more confident about their decision to invest in property in areas where home values have increased more rapidly. In contrast, renters in these areas feel it is more difficult to aspire to home-ownership and have lowered their expectations accordingly. Interestingly, the article in Propertywire points out that rapid asset price growth can lead to something that has been called ‘irrational exuberance’ where people feel overly optimistic about price trends. The Zillow Housing Confidence Index is meant to be a gauge of the health of the housing market, measured by the beliefs and aspirations of renters and homeowners. The report classifies two different groups, one of whom has experienced a rapid increase in home values in excess of 9% annually between July 2013 and July 2014, while the other group has seen growth of less than 9% during this period.

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According to this classification there are nine metro areas that have seen rapid growth in home values, and in general this index is higher for homeowners than for renters. Zillow points out this isn’t exactly surprising as people who own their own homes typically have a higher income and a more optimistic view of the real estate market and the economy.

As the economy has begun to improve, the gap between the renter’s confidence index and that of homeowners has widened in metro areas that have seen rapid price growth but has narrowed in metro areas where home value growth has not been so excessive. In areas where home values are growing at a more restrained rate, levels of optimism amongst renters are rising. This is shown in the Home Ownership Aspirations Index which measures levels of optimism amongst renters and owners. The opposite is true in markets where home values are increasing rapidly as renters are becoming more disillusioned over their prospects for future home-ownership.

This research does portray a unique picture about beliefs in the housing market. Whereas homeowners consider housing to be a good investment in areas where home values are rising rapidly, particularly as it helps build their wealth, renters dislike the rapid growth in home values as it diminishes their opinion about housing affordability.

Allison Halliday About Allison Halliday

Allison Halliday is a Realty Biz News contributing writer. She handles International Real Estate and is a seasoned blogger.

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