Amid growing optimism about finances, interest rates and inflation, Veterans and service members continue to feel better about their ability to buy a home compared to their civilian counterparts, according to the latest Veterans United Homebuyer Readiness Index, which officially launches today.
Buoyed by growing optimism about the national economy, Veterans, service members and civilians are all feeling better about their homebuying chances in the year ahead, according to the latest Veterans United Homebuyer Readiness Index.
The index reading for Veterans and service members was 70 in the third quarter, compared to 64 for civilians. Those are each the highest readings yet for the score, which Veterans United Home Loans developed in early 2023.
The proprietary composite index tracks homebuying sentiment and preparedness using the company’s quarterly national survey of Veterans, service members and civilians with near-term homebuying plans. Veterans United, the nation’s largest VA lender, officially launched the index today with nearly two years’ worth of data in total.
Veterans United Homebuyer Readiness Index
*Civilian sample not included in Q1 2024. This is an average of Q4 2023 and Q2 2024.
A surge in optimism about the U.S. economic outlook was the primary driver of homebuying readiness in the third quarter. More than half of all respondents – military and civilian – said the economy will be better off in the coming year, marking the first time a majority have expressed the sentiment.
"This growing confidence in the economy is translating directly into the housing market in communities across the country,” said Chris Birk, vice president of mortgage insight at Veterans United.
“With inflation showing signs of easing and more consumers believing mortgage rates will stabilize or even decrease, we're seeing a significant boost in homebuying readiness, especially among Veterans and service members. Although high interest rates and home prices remain a concern, this shift in optimism could help the housing market and a tight inventory environment start to thaw in the months ahead.”
Homebuyer Timeframe
One of the index’s four core elements looks at the percentage of respondents who plan to purchase a home in the next three years.
The percentage of Veterans and service members intending to buy a home in the next three years dipped slightly in the third quarter. But the percentage of those who plan to buy in the next 12 months jumped to 74% in the third quarter from 70% in the second quarter.
Fewer civilian respondents plan to buy homes in the next three years (40% in Q3). The percentage of civilians who plan to buy in the next year fell to 69% in Q3 from 75% in Q2.
The Homebuyer Timeframe Score for Veterans and service members ultimately remained static quarter-over-quarter.
Homebuyer Timeframe Score
*Score is calculated by taking the average of the two timeframes. ^No civilian sample was included in Q1 2024; data shown is an average of Q4 2023 and Q2 2024 used as a proxy.
Personal Financial Outlook
The second core element of the index asks how Veterans, service members and civilians feel about their personal finances, along with their expectations for the coming year.
Optimism about personal finances among would-be civilian homebuyers increased significantly in the third quarter. Their Personal Finance Outlook Score jumped to 38 in Q3 from 30 in Q2 and represents a new high for the group.
More than two-thirds of civilians (68%) feel they’ll be better off financially over the next year, up nearly 10 percentage points from the second quarter.
The Personal Financial Outlook Score for Veterans and service members is on par with recent quarters, reaching 40 for the first time since Q1 of 2023. Slightly more Veterans felt at ease with their finances in Q3 (48%) than in Q2 (46%).
At the same time, the percentage of Veterans who feel they’ll be worse off financially in the coming year dipped from 8% to 7%, marking a new low for the survey.
Overall, more Veterans felt at ease with their finances than civilians in the third quarter (48% to 47%). But more civilians feel they’ll be better off financially in the coming year than Veterans (68% to 55%).
Personal Financial Outlook Score
*No civilian sample was included in Q1 2024; data shown is an average of Q4 2023 and Q2 2024 used as a proxy.
U.S. Economic Outlook
The third component of the index considers respondents’ outlook about the broader national economy.
A positive future economic outlook continues to contribute the most to growth in the overall Homebuyer Readiness Index. Buyers remain optimistic that the economy will be better off in the coming year, and there are indications that inflation is softening.
There’s also growing optimism about mortgage rates. The percentage of Veterans and service members who think rates will be lower over the next year jumped 10 percentage points quarter-over-quarter (35%), while the percentage who think rates will be higher in the coming year fell to its lowest level in the history of the survey (38%).
Civilian prospective buyers remain a bit more pessimistic about rates than Veterans. Only about a quarter of civilians expect mortgage rates to be lower in the coming year, while nearly half (47%) think they’ll be higher.
Over the last year, there’s been a significant increase in feeling the economy is heading in the right direction among both groups.
Economic Outlook Score
*No civilian sample was included in Q1 2024; data shown is an average of Q4 2023 and Q2 2024 used as a proxy.
Purchase Motivators
The fourth and final factor in the index considers perceived barriers and motivating factors for prospective Veteran homebuyers.
High home prices and interest rates remain the top two barriers to homebuying for all groups. But recent Federal Reserve rate cuts have both Veterans and civilians feeling significantly better about where mortgage rates are heading.
Just 46% of Veteran prospective buyers cited high interest rates as a barrier to homebuying in Q3, down from 54% the previous quarter. The civilian figure fell six percentage points, from 45% in Q2 down to 39% in the third quarter.
“A brighter outlook on the rate front not only makes home financing more accessible but also enhances affordability, encouraging more Veterans and service members to take the next step. This positive trend is essential for sustaining the momentum in the housing market as we head into next year."
Purchase Motivators Score
*No civilian sample was included in Q1 2024; data shown is an average of Q4 2023 and Q2 2024 used as a proxy.
Methodology
Data and research firm Sparketing conducts a quarterly online survey of Veterans, service members and civilians on behalf of Veterans United. The third quarter survey of about 900 respondents was conducted from Sept. 3-18, 2024.
The Veterans United Homebuyer Readiness Index is a proprietary single number composite score that uses data taken from this quarterly survey and includes 4 key components, comprised of additional metrics, outlined below:
Homebuyer Time Frame
An average of:
- The incidence of next 3-year homebuyers is calculated by taking the total number of people who indicate they intend to buy a home in the next three years divided by the total number of people who enter the survey.
- Among the next 3-year homebuyers who qualify, the percent who intend to buy in the next 12 months
Personal Financial Outlook
An average of:
- Those who feel at ease with their current finances minus those who feel stressed about their current finances
- Those who feel they will be financially better off in the next 12 months minus those who feel they will be worse off in the next 12 months
US Economic Outlook
An average of:
- Those who feel the US economy will be better off in the next 12 months minus those who feel the economy will be worse off
- Those who feel inflation will be lower in the next 12 months minus those who feel inflation will be higher
- Those who feel interest rates will be lower in the next 12 months minus those who feel interest rates will be higher
- To make the score positive and follow a similar pattern to the other three components, we add +1 to the score
Purchase Motivators
An average of those who cite the following as barriers to buying a home right now:
- Lack of housing inventory
- High home prices
- High interest rates
- To follow a similar pattern to the other three components, we take the inverse of the average (in other words, the percent not selecting these as barriers to buying a home right now)
