Three-quarters of Americans believe their local housing market is "cooling off" – among them, 72% say they are not surprised, according to results from ValueInsured's Q4 2018 Modern Homebuyer Survey, released today.

his shift in market perceptions follows five consecutive quarters where majority of Americans believed housing was overheated. Among states with the most robust home sales activity, 22% of residents in California, 19% in Colorado, 36% in Texas, and 22% in Washington say their local market is not cooling.

3 in 4 Americans report their housing market has cooled
Hand-out 3 in 4 Americans report their housing market has cooled

The ValueInsured Housing Confidence Index registered at 63.0 on a hundred-point scale for all Americans in Q4, down 4.7 points in one year. Homeowners, historically the most confident segment on the Index, produced a score of 71.6 in Q4, the second-lowest level recorded in thirty months.

The report indicates millennial homeowners are among the most bearish:• 72% report home shoppers in their neighborhood are less aggressive now compared to one year prior.
• 67% expect a home bought in their neighborhood today will likely decrease in value one year from now.

A Shift from Seller's to Buyer's Market
Millennial homeowners' outlook signals the starter-home seller's market may have peaked. 78% believe now is a good time to sell; however, only 38% of those who wish to buy a starter home in the near future believe now is a good time to buy – down 8 points in one year. This is meaningful, as starter-home owners' hesitancy to sell and the subsequent inventory drought had been a key catalyst that drove up home prices in many major markets in recent years.

"The ValueInsured Survey revealed some concerning evidence about the changing psychology of the housing market," said Robert Shiller, the Nobel Prize-winning economist. "We will be watching these numbers as they unfold over the future."

Despite observing market adjustments, 72% of all Americans and 78% of urban residents believe home prices are still too high. The latest data represent 10-point and 13-point increases, respectively, from Q2 2018. Urban homeowners in particular blame "flippers and speculative investors" (70%) and "wealthy transplants from more expensive housing markets" (66%) for inflating their local home prices to unsustainable levels.

Theories for what inflated home values aside, many prospective home buyers now plan to wait it out before pulling the trigger:• 59% of all interested home buyers (including first-time and upgrade buyers) say they plan to wait for a "meaningful correction" before buying.
• 14% plan to drop out of buying altogether if a correction does not occur.

"In August 2017, ValueInsured was among the first to report Americans' concerns about overheated housing and a possible correction," said Joe Melendez, CEO and founder of ValueInsured. "Fast forward fifteen months, Southern California is in its worst housing slump in over a decade, Seattle leads the nation in fastest home-price drop, and North Texas has the largest sales decline in seven years. Buyers have switched from hoop jumpers to bargain-hunter mode. Expect the market to stall in the near term."