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The housing market is on the path to recovery and it is important that housing professionals understand what drives demand in the market and how to aid the market to its full recovery. In order to prevent the housing bubble from bursting again, it is essential to understand the thought process of the American home buyer. A recent study determined the price of a home and mortgages rates are not the most vital factors when considering to purchase a home, but rather the confidence of the buyer in the assurance the home will be a sound investment, is the most significant factor. To gain an understanding of why buyer confidence is essential, we must first look into the thought of individuals through the home buying process.
A home is more than a shelter and an immediate fulfillment, but rather a long term investment for an individual. Buying a home is a major investment and commitment for people and their mental state throughout the process can greatly influence the final outcome. As the sit down to write a check or sign a sales agreement, they are wondering if the risks are too high, if they have completed their cost calculations properly, and about their future. In order to produce a complete recovery of the housing market, close attention to these worries and a buyers perception and attitude in the market is essential.
Buying a home is a long-term investment and as a result buyers are often more cognizant to the slightest changes in the housing market. In many instances buyers are shown a greater understanding and sense of the market than professionals. Buyers foresight is imperative in the home buying process because it can mean they make an investment, or defer until the market is in a better cycle. By following market trends they educate and prepare themselves to make a finically sound decision. In most cases, the predictions on home prices, mortgage rates, and other influencing factors were strongly correlated to prices in actuality.
Although home buyers are more knowledgeable on the home buying process, they can still be influenced by certain aesthetics of a home. Their perception of a house and the characteristics it offers can vary depending on the time of year. This is known as the projection bias. Often buyers will overvalue certain housing characteristics, like a pool, and undervalue others. If they are buying during the winter a pool will not look like a positive benefit for their investment, while buying in summer is the opposite. These characteristics of a home are viewed in a more immediate frame of mind, while the buyer views all other factors and aspects in a long-term frame of mind.
The decline in the housing market took a toll on many Americans, but many still stated buying a home was the best investment they could make. People have been remained confident in home ownership and this mentality has been essential in helping the housing market to maintain a relatively stable level of home ownership.
When it comes to the revival of the housing market, the mindset of the buyer is the most important aspect. Prices and mortgage rates play a large role in the market, but the confidence of the buyer is essential for a rebound.