As interest rates rise, homes in hot markets like San Diego are already looking unaffordable for buyers with lower incomes – especially first-time buyers – as more income is devoted to mortgage payments, according to the Zillow Housing Confidence Index (ZHCI).
Mortgage rates stand at about 4.2 percent nationally, according to the Zillow Mortgage Marketplace, above the 2013 lows of roughly 3.3 percent.
In San Diego, 8 percent of all residents indicated they wanted to buy a home in the next year.
Among current renters in San Diego, about 12 percent said they would like to buy a home in the next 12 months, according to Zillow Inc. (Nasdaq: Z).
Nationally, homeownership aspirations among current renters were strong, with about 10 percent of all renters nationwide saying they would like to buy within the next 12 months.
The vast majority of these respondents also said they were confident or somewhat confident they could afford homeownership now.
If all renters that indicated they wanted to buy actually did purchase a home in the next year, it would represent more than 4.2 million first-time home sales, more than double the roughly 2.1 million first-time home buyers in 2013.
Despite strong desires to own a home, market conditions remain mixed for potential buyers.
Inventory is up 11 percent nationally compared to a year ago, it still remains well below optimal levels, and has fallen year-over-year in eight of the 20 metro areas surveyed by the ZHCI – including San Diego, where inventory is down 12.3 percent from 2013.
"For the housing market to continue its recovery, it is critical that homes are both available and remain affordable to meet the strong demand these survey results are predicting, particularly from first-time homebuyers," said Zillow Chief Economist Stan Humphries.
"Even after a wrenching housing recession, this data shows that the dream of homeownership remains very much alive and well, even in those areas that were hardest hit," he said.
"But these aspirations must also contend with the current reality, and in many areas, conditions remain difficult for buyers," Humphries said. "The market is moving toward more balance between buyers and sellers, but it is a slow and uneven process."
The ZHCI, sponsored by Zillow and developed by Pulsenomics LLC, is measured on a 0 to 100 scale, with readings above 50 indicating positive sentiment.
The overall ZHCI for San Diego was 67.2 at the start of the year, compared to 63.7 for the United States.
The overall U.S. ZHAI among all households, which measures consumers' plans to buy and their attitudes toward the social value of homeownership, stood at 62.4.
"While it is reassuring to see all of the headline ZHCIs in positive territory, the underlying indicators of homeownership aspirations, housing market conditions and expectations for each metro area and tenure segment reveal significant variability," said Terry Loebs, founder of Pulsenomics.
"Several of these drivers of overall housing confidence registered negative or only marginally positive readings in some cities," he said.
"These data confirm that real estate recovery and economic healing are relative, local phenomena, and in some instances, likely reflect the lingering psychological impact of the housing bust."