Survey of 1,767 Realtors found that they are the most confident they’ve been in years
Real Estate Confidence Index
These are the results of the first Real Estate Confidence Index (RECI) survey. 1,767 real estate professionals from across North America participated in this survey and told us how confident they are in their local real estate markets. We compared this survey’s data to several previous surveys conducted on ActiveRain to create the following statistics.
Q2 2013 – RECI Survey Results
Most confident overall: Minneapolis-St. Paul (91)
Highest confidence in any category: Minneapolis-St. Paul (95, Real Estate Prices)
Largest increase in overall confidence: Minneapolis-St. Paul (+18.18%)
Least confident overall: New York (74)
Least confidence, any category: New York (66, New Construction)
Lowest increase in overall confidence: San Diego (-1.27%)
Real Estate Trends for Q2 2013
Low housing inventory across the country is leading to increasing housing prices and bidding wars among homebuyers. Depending on the market, one-third to one-half of real estate professionals are concerned about low inventory levels.
Homebuyer confidence is much higher now than it was a year ago, indicating that consumers believe we are past the rock bottom of the housing market collapse.
There is apprehension among both real estate professionals and consumers about how strong the U.S. economic and real estate market recoveries really are. Some real estate professionals are afraid we are entering another real estate bubble.
Homebuilder confidence is gradually improving.
How Many Real Estate Professionals Expect to See Improvements in Their Markets?
The majority of U.S. real estate professionals are optimistic about the direction their real estate markets are headed. Given the low inventory and seller’s markets that can be found throughout the U.S., it is unsurprising that the vast majority of American Realtors agree that housing prices will rise in the coming quarter. On the other hand, the uneven and slow nature of economic recovery from the Great Recession most likely explains the comparatively high level of disagreement among real estate professionals that their local economies will improve.
74% believe NEW CONSTRUCTION STARTS will increase
71% believe their LOCAL ECONOMIES will improve
87% believe that HOUSING PRICES will increase
85% believe REAL ESTATE TRANSACTIONS will increase
Regional Real Estate Trends
The East – Slow Economic Growth and Low New Construction Starts Dampen Realtor Confidence
Eastern real estate professionals expressed the least confidence in their local markets compared to Realtors® in any other region. However, Eastern real estate professionals are only 6 percent less confident than their counterparts in the most confident region, the South. This shows that even the “winners” and “losers” in U.S. real estate have relatively similar standings at the moment.
Real estate professionals in the East, like the rest of the country, are most confident that real estate prices and real estate transactions are set to increase. We’re grateful that Hurricane Sandy didn’t put a significant damper on either of these important aspects of the East’s real estate market! Population and economic growth in the East have been slow for many years, so it is unsurprising that Eastern real estate professionals have relatively little confidence that demand for new housing will grow and local economies will improve in the near future.
The Midwest – Expects to See the Most Real Estate Transactions
Midwestern real estate professional have the second highest confidence out of any region’s real estate professionals. They are most confident that real estate transactions will increase in the upcoming quarter, and their confidence score in this category, 88, is tied for the highest score in any category this quarter! The Midwest is also home to the most confident market, Minneapolis-St. Paul, which has an overall confidence score of 91.
The South – The Most Confident Region in the U.S.
Southern Realtors® are more confident in their regional market’s future than their counterparts are in any other region. They are most confident that real estate transactions will increase in the coming quarter, thanks largely to the fact that new home construction is ramping up. Like Realtors® in the rest of the U.S., Southerners are least confident that their economy, out of all aspects of their local markets, will see improvements.
The West – House Values Set to Skyrocket
While Western Realtors® have moderate confidence in real estate transactions and new construction starts when compared to their Southern and Midwestern counterparts, they have the highest confidence that real estate prices will increase. It is probably not a coincidence that the West is home to many of the markets that were thrashed the hardest by the housing market collapse (like Phoenix, Las Vegas and Stockton); prices in these cities are adjusting to the shrinking pool of shadow inventory.
Strong local economies in some areas, like the San Francisco and Seattle metropolitan markets, are rapidly lifting them to pre-crash levels. In other areas, particularly those dominated by blue-collar jobs, poor economies are responsible for keeping local real estate markets depressed.
Canadian Real Estate Confidence
Canadian real estate professionals are considerably less confident in their local markets than their American counterparts. The overall Canadian confidence score for this quarter is 75, a whopping 9 percent lower than the U.S. score of 82. Canada’s Real Estate Confidence Index score was held back by a low score of 68 for new construction starts. This low score isn’t particularly surprising, given that many Canadian markets have been flooded with new homes – and particularly new condominiums – in the last half-decade, sparking fears of overbuilding.
On the plus side, Canadian real estate professionals are 13 percent more confident in their markets in the second quarter of 2013 than they were in the previous quarter. Between the two quarters, real estate professionals’ confidence that real estate prices, real estate transactions and their local economies would improve rose by 15 percent or more! It is likely that the slump in real estate confidence Canadians experienced at the beginning of this year was a reaction to the overheated Canadian market that caused the credit ratings of six Canadian banks to be downgraded by Moody’s.
About the Q2 2013 Real Estate Confidence Index Survey
A total of 1,765 real estate professionals took the Q2 2013 Real Estate Confidence Index Survey. Around 82 percent of the respondents are members of ActiveRain, the world’s largest real estate social network. The rest of the respondents are current Market Leader customers.
The vast majority of the survey respondents, 96 percent, live and work in the U.S. Of the American real estate professionals, 18 percent reside in the Eastern U.S., 13 percent reside in the Midwest, 31 percent reside in the South and 34 percent reside in the West. The top three markets in terms of the number of respondents were Phoenix (102), New York (100) and Los Angeles (98).
Two-thirds of the survey respondents work as real estate agents. The next most common profession among the respondents was broker-owner. Half of the survey respondents have worked in the real estate industry for six to 15 years, and another 31 percent have worked in real estate for 16 years or more. Fifty percent of survey respondents are male, and 50 percent are female. The most common age demographic among the respondents was 50-54, and the 55-59 and 60-64 age groups were close behind.
Confidence of Case-Shiller Markets
A comparison of the relative confidence levels of the markets tracked by the Case-Shiller Index for the second quarter of 2013.
MARKET NAME | CONFIDENCE SCORE | CHANGE FROM LAST QUARTER
MINNEAPOLIS-ST PAUL | 91 | 18.18%
DALLAS-FORT WORTH | 88 | 10.00%
WASHINGTON, D.C. | 86 | 11.69%
SEATTLE | 85 | 8.97%
DETROIT | 85 | 6.25%
CHARLOTTE | 85 | 14.86%
PORTLAND | 84 | 5.00%
DENVER | 83 | 5.06%
PHOENIX | 83 | 3.75%
SAN FRANCISCO | 83 | 5.06%
CLEVELAND | 83 | 12.16%
TAMPA BAY | 83 | 6.41%
BOSTON | 81 | 6.58%
ATLANTA | 81 | 5.19%
LAS VEGAS | 80 | 5.26%
CHICAGO | 79 | 3.95%
SAN DIEGO | 78 | -1.27%
LOS ANGELES | 78 | 1.30%
MIAMI-FORT LAUDERALE | 77 | 5.48%
NEW YORK CITY | 74 | 1.37%
About the Real Estate Confidence Index
The Case-Shiller home-price index and the Census Bureau’s Building Permits Survey are perhaps the most prominent real estate indices in the U.S. They are used by news publications and real estate experts across the country to gain insight on the health of the national real estate market. The former index collects monthly home price data from 20 major metropolitan areas and uses these numbers to track the relative value of U.S. homes. The latter index tracks another vital aspect of real estate markets, new construction starts, in various states and regions across the country.
While the Case-Shiller index and the Building Permits Survey accomplish their intended purposes, they have two major shortcomings preventing them from being perfect indicators of the health of U.S. real estate.
The first shortcoming is the scope of the indices. Both the Case-Shiller index and Building Permits Survey analyze real estate on high-level terms. The most local scope between the two indices comes from the Case-Schiller index, which divides the U.S. into 20 metropolitan areas.
The second shortcoming of these indices is that they are fixated on what has happened in the past. At the earliest, they can only be used to gauge how the U.S. real estate market has performed in the most recent month or quarter. In this way, a consumer can observe a steady uptick in housing prices and new construction starts on these indices for a year or more and be at risk of falsely concluding that the upward trend means that it is a good time to buy or sell real estate.
The Real Estate Confidence Index sidesteps these shortcomings by tapping the unique knowledge of local real estate professionals to gauge their confidence in their markets in the upcoming quarter. By aggregating the knowledge of many Realtors® in four distinct aspects of their local markets, the Real Estate Confidence Index is able to achieve a broader, more complete perspective than any existing index.