- The headline U.S. Housing Confidence Index dipped to 66.9 in January from 67.4 a year ago.
- Among people 18-34 years old, 65 percent said homeownership and the American Dream go hand-in-hand, more than any other generation.
- People-of-color also were more likely than whites to consider homeownership integral to the American Dream.
Americans’ overall confidence in the U.S. housing market slipped at the beginning of 2016 from a year ago, according to the January 2016 Zillow Housing Confidence Index, driven lower by diminished expectations of the market’s future. But despite this uncertainty, overall aspirations for homeownership are at their highest level in two years, driven in large part by faith among younger Americans and Americans-of-color in the general value of homeownership.
And continued optimism and confidence among these key groups will likely go a long way toward ensuring the stability of the housing market for years to come.
The semi-annual Zillow Housing Confidence Index, sponsored by Zillow and calculated by Pulsenomics LLC, is calculated for the U.S. as a whole and 20 large metro markets nationwide. It is based on a national survey of 10,000 American renters and homeowners. The ZHCI is composed of three sub-indexes: one that summarizes homeowner and renter assessments of current market conditions (HMCI); another that measures their expectations regarding future home values and affordability (HEI); and a third that gauges their aspirations and attitudes regarding homeownership (HAI).
The headline U.S. Housing Confidence Index fell in January compared with a year ago, to 66.9 from 67.4. Among the three sub-indices, the current U.S. Housing Market Conditions Index (HMCI) nationwide rose to 69.6, from 67.3 a year ago. The U.S. Housing Expectations Index (HEI) was 67.5 in January, down from 69.9 a year ago. The U.S. Homeownership Aspirations Index (HAI) rose to 63, from 62.5 a year ago.
Because the expectations index factors more heavily into the larger headline index, its larger year-over-year decline helped offset smaller annual gains in the other two sub-indices and push the overall confidence index down.
The survey data underlying the ZHCI reveal that millennials and people of color are most likely to associate homeownership with the American Dream. Among people 18-34 years old, 65 percent said homeownership and the American Dream go hand-in-hand, more than any other generation (64 percent of those aged 65 and older associated homeownership with the American Dream). People-of-color also were more likely than whites to consider homeownership integral to the American Dream. Of Hispanic respondents surveyed, 70 percent agreed that owning their own home is necessary to live the American Dream, followed by 64 percent of Asian respondents and 63 percent of black respondents. Less than 60 percent of white respondents agreed.
The results come at a time when rising rents and stagnant incomes are making it tough for many Americans to buy homes. Millennials are renting longer than past generations as they put off major life decisions, but Zillow’s survey shows millennials value homeownership more than their parents and similarly to their grandparents. Additionally, millennials in particular have a rosier long-term outlook on the performance of the housing market: Those aged 18-34 said they expected home values to grow by 5 percent per year, on average, over the next ten years, compared to just 3.7 percent for all Americans.
And while the transition from renter-to-homeowner is particularly difficult today in the face of tight credit, low inventory and fierce competition, both younger renters and Hispanic renters indicated homeownership was a primary goal that they were confident in achieving. More than half (54 percent) of Hispanic renters, for example, said that owning a home someday is a specific goal they are determined to reach, up from 43 percent two years ago. Among millennial renters in all 20 markets surveyed, 80 percent said they are confident or somewhat confident they’ll be able to afford to own a home someday, compared with 65 percent of renters overall.
Continued confidence and optimism among millennials and Americans-of-color, in particular, will be critical in ensuring the stability of the housing market as demographics shift in coming years and these two groups grow both in cultural influence and economic clout. Sales of both existing homes and new homes have been tepid in recent months. If sales volumes are to really break out, it will very likely be on the strength of home purchases made by aging millennials that are set to overtake Gen X as the largest home buying group in America, and by growth in homeownership rates among non-white Americans.
The tables below summarize the levels of the January 2016 Zillow Housing Confidence Index, for both the headline index and all three sub-indices; and for all residents, homeowners only and renters only. Click on the tables to enlarge.
 The ZHCI summarizes more than 300,000 data points collected from questionnaires completed by 10,000 heads of household across the country as part of the semi-annual U.S. Housing Confidence Survey.
The HEI is assigned a 50 percent weight in calculating the headline confidence index; both the HAI and HMCI are assigned 25 percent weights.