The latest edition of The Zillow Housing Confidence Index (ZHCI), published this morning, shows that confidence in the residential real estate market firmed further in July, reflecting the persistence and breadth of the U.S. housing recovery.
For those unfamiliar with this gauge, ZHCI was developed by Pulsenomics LLC to effectively monitor and concisely communicate the pulse of the U.S. real estate market nationally and at individual metropolitan area levels. The index was designed to cogently summarize and track consumer attitudes monitored by The U.S. Housing Confidence Survey, which Pulsenomics administers to more than 10,000 households across the country every six months.
The July 2016 U.S. Composite ZHCI edged up 0.4 points to 67.3 since its previous reading in January (a reading over 50 indicates a confidence surplus; below 50, a deficit). Over the past two years, housing confidence has increased in 18 of the 20 metro areas tracked, with the headline composite index now 3.1 points higher than its July 2014 level. Rising home equity levels, healthy housing market expectations among millennials, and resilient homeownership aspirations among minority groups have all been factors in the robust readings of overall U.S. housing confidence.
However, within certain metro areas and market segments, key sentiment indicators have begun to fade. Our measure of housing market expectations among residents of the largest and most expensive U.S. cities has fallen this year, and within most metro areas, the anxieties of prospective home buyers continue to rise. The confidence gap between homeowners and renters continues to widen. These and other signals in the ZHCI data suggest that home price appreciation and housing confidence could weaken in the coming months.
Of the 20 large metropolitan statistical areas (MSAs) that comprise ZHCI, overall housing confidence is now highest in Phoenix (70.8) and still lowest in St. Louis (63.5). Housing confidence has increased this year in 13 of the 20 metropolitan areas studied; it has improved the most in Philadelphia and fallen the most in San Jose.