Homeowner Sentiment Survey 2016

Homeowner Sentiment Survey August 2016 Wave 5

Š Copyright 2016 Daniel J Edelman Inc.

Methodology The study was conducted among n = 2,521 respondents living in the U.S. The survey was fielded June 8-22, 2016

Audience

Current Homeowners

Prospective Homeowners

Audience Definition

Sample Size

Margin of Error

Individuals who currently own a home as their primary residence

N= 2,016

+/-2.18%

Individuals who do not currently own a home and are likely to buy a home as their primary residence in the next six months

N= 505

+/- 4.36%

2

Perception of the Market

© Copyright 2016 Daniel J Edelman Inc.

Favorability towards the real estate market continues to increase among Current Homeowners, and remains unchanged among Prospective Homeowners • Lower interest rates continue to be driving favorability

Why are you favorable towards the real estate market?

[Among those favorable, ranked by Current Homeowners]

Lower interest rates

Overall Perception of Real Estate Market [Showing “very favorable” + “favorable”]

Increased value (appreciation) of real estate

Prospective Homeowners

Current Homeowners

56% 51% 44%

26%

A larger variety of homes on the market

W1

W1

70% -9 pts.

W2

W2

61%

78% 78%

61%

W5

61% 66%

Confidence in the U.S. economy Confidence with personal financial situation

65% 60%

W5

65%

+5 pts.

Lower amounts of foreclosures in the U.S. 20% Banks’ ability to issue mortgages to consumers +/-0 pts.

Other Current Homeowners

30%

28% 31%

+5 pts.

W4

48%

32% 37% 24%

64% 60%

+3 pts.

W4

-14 pts.

-3 pts.

W3

58%

Good time to make the investment

64%

-3 pts.

W3

33%

27%

24% 26% 1% 0% Prospective Homeowners 4

Q1. Based on your personal experience and/or what you know about the process of buying and selling homes, what is your overall perception of the residential real estate market in the U.S.?

Q2. [If Very Favorable/Favorable] You previously stated that you have a favorable impression of the residential real estate market in the U.S. Which of the following reasons best describes why you are favorable towards the real estate market?

Perception of the housing market has improved among Current Homeowners and has decreased among Prospective Homeowners Compared to last year, do you believe that the housing market is moving in the right direction or off on the wrong track?

Prospective Homeowners

Current Homeowners Off on the wrong track W1

25%

Moving in the right direction

Off on the wrong track

20%

75%

Moving in the right direction

80% -9 pts.

-4 pts.

W2

29%

29%

71%

71% -3 pts.

-4 pts.

W3

33%

32%

67%

68% +7 pts.

-1 pts.

W4 W5

34%

25%

66% +4 pts.

30%

70%

29%

75% 71%

-4 pts.

5

Q3. Compared to last year, do you believe that the housing market is moving in the right direction, or off on the wrong track?

Respondents open-endedly cite the higher home values, more inventory, and low interest rates as key reasons why they believe the housing market is moving in the right direction Why do you believe that the housing market is moving in the right direction?

[Open end]

Higher Home Values “Prices are regaining some of the ground lost in the recession and housing bust.

Sales of existing homes have increased, as listed in the local paper.”

-Current Homeowner

“Many people are buying and a lot of people are selling and upgrading.”

-Current Homeowner

“There are fewer foreclosures and real estate is beginning to increase in value again.”

-Prospective Homeowner

More Homes on the Market “There is a larger selection of homes on the market and also a larger amount of options for acquiring a mortgage.”

-Current Homeowner

“For people who are in the market to buy, this is the right time. There is a lot more available out there and at decent prices.”

-Prospective Homeowner

“Builders seem to be building more homes than ever. More land is being bought to build on, and lots of new homes are being built on these properties.”

-Current Homeowner

Low Interest Rates “Interest rates are still low, but housing values are going up. If I buy now, the interest that I pay will be less than at other times.”

-Prospective Homeowner

“It is a good time to purchase a home because interest rates are low.”

-Current Homeowner

“I've heard interest rates for homes are at their alltime low, which seems like a good thing.”

-Prospective Homeowner

6

Q4: Why do you believe that the housing market is moving in the right direction?

Since the last wave, the percentage of both Current and Prospective Homeowners that believe homes have increased in value compared to last year has increased slightly Prospective Homeowners

Current Homeowners Compared to last year, do you think homes have...

Decreased in value

Increased in value

Decreased in value

Increased in value

W1

29%

71%

W1

34%

66%

W2

28%

72%

W2

32%

68%

W3

29%

71%

W3

37%

63%

W4

29%

71%

W4

35%

65%

W5

25%

75%

+4 pts.

W5

31%

+4 pts.

69%

7

Q7: Compared to last year, do you think that homes have‌

Attitudes and Challenges Across Generations

Š Copyright 2016 Daniel J Edelman Inc.

Surprisingly, Millennials are in line with Gen-Xers and Boomers when it comes to homeownership •

•

Millennials and Gen-Xers, first-time prospective homeowners and non first-time alike, are more likely to agree that they want to wait to buy until they can afford their dream home Millennials overall are more likely to agree that buying a home is “too risky” Please indicate to what extent you agree with the following statements.

[Showing agree completely + somewhat agree]

Millennials

Gen-Xers

Boomers

89% 92% 95%

Owning a home is financially beneficial in the long run

85% 88% 93%

Owning a home is an important part of the American Dream Buying a home is a stressful and complicated process

82% 77% 75%

I am confident that my saving ability will ensure that I can have a comfortable future

81% 73% 69%

I want to wait until I can afford my dream home to become a homeowner

54%

Q68_NEW: Below are a number of statement. Please indicate to what extent you agree with each of the following statements.

51%

15%

It is possible to achieve the American Dream easily Buying a home is too risky

70% 71%

65% 58% 54%

I am well positioned to buy a home I am willing to live with my parents/relatives to save for buying a home

Millennials still see owning a home as an important part of the American Dream

41% 19%

40%

61%

58% 53% 52%

9

Despite coming of age during the Great Recession, Millennials surveyed have the highest satisfaction with the U.S. economy and are the most favorable towards the real estate market

Satisfaction with the U.S. Economy (Showing very + somewhat satisfied)

Millennials

Gen-Xers

Boomers

66%

51%

39%

Wave 4: 66%; Wave 3: 68%

Favorability towards the Real Estate Market (Showing very + somewhat favorable)

76% Wave 4: 75%; Wave 3: 59%

Wave 4: 48%; Wave 3: 49%

Wave 4: 34%; Wave 3: 34%

60%

65% Wave 4: 62%; Wave 3: 58%

Wave 4: 54%; Wave 3: 52%

Q1a: How satisfied are you with the state of the U.S. economy today?

Q1: Based on your personal experience and/or what you know about the process of buying and selling homes, what is your overall perception of the residential real estate market in the United States?

10

While Boomers overwhelmingly cite low interest rates as the primary reason they are favorable towards the real estate market, Millennials and Gen-Xers’ reasoning is more fragmented Which of the following reasons describes why you are favorable towards the real estate market?

Millennials

Gen X

Boomers

72%

49%

45%

40% 30% 24%

Good time to make the investment

47% 40%

36%

33%

37%

36% 29%

27% 21%

Lower interest rates

34% 24%

38% 30% 23% 22%

25% 23%

28%

A larger variety of Confidence with Confidence in the Increased value Banks’ ability to Lower amounts of homes on the personal financial U.S. economy (appreciation) of issue mortgages to foreclosures in the market situation real estate U.S. consumers 11

Q2: You previously stated that you have a favorable impression of the residential real estate market in the United States. Which of the following reasons best describes why you are favorable towards the real estate market?

Millennials are most likely to say that they are knowledgeable about mortgage rates •

However, only 13% recognize that mortgage rates are at historic lows, and over one-quarter of Millennials surveyed surprisingly think that increased mortgage rates would make it easier to buy a house

How knowledgeable are you about mortgage rates?

(Showing very + somewhat knowledgeable)

Millennials

70%

If mortgage rates were to go up, how do you think they would affect the real estate market?

How do you perceive current mortgage rates today?

85%

Wave 4: 65% Wave 3: 64%

60%

75%

53%

63% 38%

Gen-Xers

65%

Wave 4: 64% Wave 3: 63%

33% 24% 25%

28%

17%

13%

5%

Boomers

54%

Wave 4: 56% Wave 3: 56%

Low

Average

Q29: How knowledgeable are you about mortgage rates?

Q33: Based on what you know, do you perceive current mortgage rates to be low, average, or high today?

Q48: If mortgage rates were to go up, how do you think they would affect the real estate market?

High

9% 11%11%

14% 5%

Don’t know

They would make it They would make it easier for people to harder for people to buy a home buy a home

9% 11% 10%

Don’t know

12

There are also differences in how each generation views interest rates • •

Millennials and Gen-Xers are more likely than Boomers to say the interest rate is on the rise Similar to their view on mortgage rates, Millennials are significantly more likely than Gen-Xers and Boomers to say that if the interest rates were to increase, it would be easier for people to buy a home If interest rates were to go up, how do you think they would affect the real estate market?

How would you characterize US interest rates right now?

On the rise

Holding steady

30%

27%

Falling

Don't know

Millenials

Gen-Xers

Boomers 80%

17% 65% 57%

50%

54%

66% 17%

9% 10%

7% 13%

6% 11%

Millennials

Gen-Xers

Boomers

20% 10%

3%

16%

10%

They would make it They would have no easier for people to buy impact a home

5% They would make it harder for people to buy a home

9%

7%

Don’t know

13

Q8: Based on your own experience and knowledge, how would you characterize U.S. interest rates right now?

Q10_NEW: If interest rates were to go up, how do you think they would affect the real estate market?

Renters: Challenges and Home-Buying Ability

Š Copyright 2016 Daniel J Edelman Inc.

A vast majority (88%) of Prospective Homeowners surveyed are currently renting. Though most Renters expect to rent for less than 12 months, many Renters end up renting for longer periods of time Expectations towards Renting [Among Renters]

88% of Prospective Homeowners currently rent

Amount of time as a renter Expectations of time renting

56%

35%

35%

27%

30% Gen-Xers

19% Renters

by Generation

10%

10%

6%

11% Boomers

59% Millennials

QNEW_S7a: Do you rent the home you currently live in?

Q59: How long have you been renting your current home?

Q60: How long do you expect to continue renting a home to live in (rather than buying a home)?

1% 1-12 months

1-3 years

3-5 years

6-10 years

2% More than 10 years 15

The main reason for renting reflects generational expectations as Millennials and Gen-Xers make up the majority of Renters Reasons for Renting [Ranked by Millennial Renters]

Millennial Renters

Gen-Xer Renters

Boomer Renters

I am waiting until I can save up enough money to buy my dream home I cannot save up enough money to buy a home

24%

I cannot find a home that I want to buy

29% 22%

I do not want to take on the financial risk of buying a home

14%

I am not knowledgeable about the home buying process

20%

8%

I do not want to go through the hassle of buying a home

10%

I do not want the responsibility of a mortgage

15%

12%

7% 6%

26%

19%

18% 18%

18% 16% 16%

I like living in more desirable neighborhoods where I cannot afford to buy a home

32%

19%

12% 14% 8%

32% 34%

19%

10%

6%

33%

21%

11%

9% 10%

I would prefer to spend less on housing and more on life experiences such as travel, activities and entertainment

37%

25% 24%

10%

Renting suits my lifestyle more than owning a home

I lost my home due to the housing crash

27% 27%

I cannot qualify for a mortgage

I do not think that owning a home is financially beneficial

34%

24%

The process of finding and buying a home is overwhelming

I do not want to commit to settling down in one place for a long-term period

37% 35%

26%

11%

Q61_NEW: There are many reasons why people choose to rent rather than own. What are the most important reasons you would hesitate to move forward with buying a home and continue to rent?

16

Among Millennial Renters, the top reason for continuing to rent rather than own is that they are waiting until they can save up enough money to buy their dream home • They also think that the home buying process is overwhelming, and are having trouble finding a home they want to buy

What are the most important reasons you would continue to rent?

[Showing top 5 for Millennial Renters]

37%

37%

33%

32%

I am waiting until I can save I cannot save up enough The process of finding and I cannot find a home that I up enough money to buy money to buy a home buying a home is want to buy my dream home overwhelming Q61_NEW: There are many reasons why people choose to rent rather than own. What are the most important reasons you would hesitate to move forward with buying a home and continue to rent?

29%

I cannot qualify for a mortgage 17

While all Renters are impacted by financial challenges, Long-Term Renters are the most likely to agree that overall financial challenges impact their decision to purchase a home •

Long-term Renters are much more likely to agree that selecting a home mortgage broker and dealing with previous personal mortgage foreclosure or default are challenges

Financial Challenges [Showing those who "agreeâ&#x20AC;? it is a challenge; ranked by total Renters] Top challenge for those renting <1 year Renting less than 1 year Renting 1-3 years Renting 3-5 years 78%80%77%76% 76%74%74% 76% 75% 74% 73% 73%71% 69% 67% 65% 63% 63% 60% 54%

Top challenge for those renting 1-3 years 82% 80% 77% 77%

Renting 6+ years 71%69%71%

67% 57%57%55%

54% 47% 43%

44%

35%

Trying to save money

Getting a good interest rate on a mortgage, loan or home financing

Paying the processing Understanding the Having a high enough fees guidelines of a loan credit score

Selecting a bank through which to pursue a loan

Managing existing debt

Selecting a home mortgage broker

Dealing with previous personal mortgage foreclosure or default

Q27: Below is a list of several challenges or barriers that could impact oneâ&#x20AC;&#x2122;s decision to purchase a home. Please select to what extent you agree or disagree that each of the following is / was a challenge or barrier that impacted you at any point throughout the process.

18

While other challenges also matter, personal challenges are top of mind for Mid- and Long-Term Renters • •

Long-term Renters’ top challenge is finding a good real estate broker For those renting 3-5 years, finding a home that suits their family’s wants and needs is the top challenge

Personal Challenges

[Showing those who "agree” it is a challenge; ranked by total Renters]

Renting less than 1 year Top challenge for those renting 3-5 78% 78% years 76% 74% 72% 65%

Renting 1-3 years 83%

71%

75%

75% 70%

71% 66%

61%

70% 62%

Renting 3-5 years

Top challenge for those renting 6+ years 71% 60%

Renting 6+ years

80% 73% 72%

69%

67%

63% 63% 65%

59%

60% 54%

49%

57%

48%

Finding a home that suits Taking a long time to find Having the right Finding a good real estateLacking the knowledge or Worrying about the Lacking confidence that Lacking confidence about your family's wants and your ideal home resources to turn to for broker to help experience about the home's future investment now is a good time to bidding the right price for needs advice or questions throughout the process market to make an value make a real estate a new home informed decision transaction 19 Q27: Below is a list of several challenges or barriers that could impact one’s decision to purchase a home. Please select to what extent you agree or disagree that each of the following is / was a challenge or barrier that impacted you at any point throughout the process.

Those renting 6+ years are more likely to be worried about the state of the U.S. economy, and feel skeptical that now is the right time to make a real estate transaction Market Challenges [Showing those who "agreeâ&#x20AC;? it is a challenge; ranked by total Renters]

Renting less than 1 year

79% 68%

Renting 1-3 years

Renting 3-5 years

Renting 6+ years

80% 75% 70%

65%

69%

57%

Selecting a home that is competivitely priced in the market

Feeling worried about the state of the US economy

69% 63%

62%

61% 55%

Feeling skeptical that it is the right time to make a real estate transaction

54%

67%

55%

Feeling that the housing market hasn't fully recovered from the recession 20

Q27: Below is a list of several challenges or barriers that could impact oneâ&#x20AC;&#x2122;s decision to purchase a home. Please select to what extent you agree or disagree that each of the following is / was a challenge or barrier that impacted you at any point throughout the process.

Among Renters who say they rent because they are unable to become a homeowner (76%), poor credit scores, lending requirements and inability to save are more likely to impact their perception of the Real Estate Market as well as the decision of buying a home Challenges Impacting the Real Estate Market [Among Renters, showing top 5 differences]

85% 83%

83%

82% 75%

84% 77%

Challenges the Home Buying Process [Among Renters, showing top 5 differences]

83% 73%

83%

81%

77% 68%

71%

74%

71% 61%

66%

60%

52%

Credit scores Stricter lending First time buyers New lending Increasing interest impacted by the requirements can't compete requirements are rates recession make it make it more with all-cash or making it harder difficult to get a difficult to get a equity-rich buyers for potential loan mortgage buyers to qualify for loans

Trying to save money

Getting a good interest rate on a mortgage, loan or home financing

Having a high enough credit score

Selecting a bank Managing existing through which to debt pursue a loan

Q10: Below is a list of several challenges facing the real estate market today. For each of the following, please select to what extent you agree or disagree that each of the following is a challenge impacting the real estate market.

Q27: Below is a list of several challenges or barriers that could impact oneâ&#x20AC;&#x2122;s decision to purchase a home. Please select to what extent you agree or disagree that each of the following is / was a challenge or barrier that impacted you at any point throughout the process.

21

The Presidential Election and Real Estate

© Copyright 2016 Daniel J Edelman Inc.

The most amplified difference between political parties is in satisfaction with the U.S. economy and favorability towards the real estate market Democrats

Satisfaction with the U.S. Economy (Showing very + somewhat satisfied)

68%

34%

45%

Current

Current

Current

65%

Among Total

35%

53%

Among Total

45%

54%

Prospective

Prospective

75%

61%

62%

Current

Current

73%

Among Total

47%

Among Total

Prospective

Current

Favorability towards the Real Estate Market (Showing very + somewhat favorable)

Independents

Republicans

61%

63% Prospective

Among Total

63%

68% Prospective

Among Total

66% Prospective 23

Q1a: How satisfied are you with the state of the U.S. economy today?

Q1: Based on your personal experience and/or what you know about the process of buying and selling homes, what is your overall perception of the residential real estate market in the United States?

Current Homeowners and Prospective ones, regardless their political identification, perceive similar challenges facing the Real Estate market today • •

Independent Prospective Homeowners tend to agree more with these challenges Democrats looking to buy are also more likely than the other groups to see low interest rates and the competitive landscape as a challenge Challenges Facing the Real Estate Market Today [Showing % who “agree” it is a challenge; top 5 challenges among total]

Current Homeowners Total Current Homeowners 82% 83% 81% 80%

82% 82% 83% 80%

Democrats 81% 83% 82% 79%

Republicans 81% 81% 83% 79%

Prospective Homeowners Independents 78% 79% 80%

Total Prospective Homeowners 87%

83% 84% 75%

Democrats

81% 81% 81% 82% 75%

81% 80%

83% 78%

Republicans 81%

81% 75% 69%

Credit scores Stricter lending First time buyers The competitive impacted by the requirements make it can’t compete with landscape drives up recession make it more difficult to get a all-cash or equity-rich offers and prices buyers difficult to get a loan mortgage

Increasing interest rates

72%

Credit scores Stricter lending First time buyers The competitive impacted by the requirements make it can’t compete with landscape drives up recession make it more difficult to get a all-cash or equity-rich offers and prices buyers difficult to get a loan mortgage

Q10: Below is a list of several challenges facing the real estate market today. For each of the following, please select to what extent you agree or disagree that each of the following is a challenge impacting the real estate market.

Independents 84%

83% 71%

Increasing interest rates 24

Overall, respondents largely “don’t know” how the results of the upcoming presidential election will impact the housing market How do you think the results of the upcoming presidential election will impact the housing market?

Total

Democrats

Republicans

Independents

44%

21%

24%

22% 17%

Positively impact

20%

22%

46%

46%

41%

22% 16%

Have no impact

D20_NEW: How do you think the results of the upcoming presidential election will impact the housing market?

13%

11%

14%

15%

Negatively impact

Don’t know

25

Current and Prospective Homeowners are also split on which of the current presidential candidates will have the greatest positive impact on the housing market Which candidate do you think will have the greatest positive impact on the housing market?

31% Hillary Clinton

31%

Among Current Homeowners

33%

Hillary Clinton

33% Donald Trump

Donald Trump

36% “Don’t know”/Other/Prefer not to answer

Among total

35% Hillary Clinton

36%

“Don’t know”/Other/ Prefer not to answer

D21_NEW: Which candidate do you think will have the greatest positive impact on the housing market?

38% “Don’t know”/Other/Prefer not to answer

27% Donald Trump

Among Prospective Homeowners 26