Americans are slightly more upbeat about owning a home and the housing market in general than they were at the end of 2010, according to the latest National Housing Survey released by Fannie Mae. However, they still lack confidence in the overall economy.
"Despite moderate signs of improvement in the housing market and the overall economy, consumer attitudes continue to be shaped by ongoing concerns about the recovery and their own financial situations," said Doug Duncan, Vice President and Chief Economist of Fannie Mae. "Uncertainty regarding the improving labor market, expectations of little home price and interest rate movement, and rising household expenses has left consumers feeling less financially secure and translates into weak mortgage demand. While we have seen indications of improving economic activity in recent months, especially the strengthening of private sector employment, consumers' attitudes improved only marginally, and in some areas not at all, from a year ago, reflecting the continued unevenness and uncertainty of this recovery."
One-third of respondents think the U.S. economy is on the right track but this is up from 29 percent last quarter and is the highest percentage recorded in the survey to date. When it comes to housing prices, 30 percent expect prices to improve over the next year, up four points from Q4 while 48 percent think they will remain the same and 17 percent expect further losses. On average the expectation was for a 0.9 percent increase compared to an estimate of 0.4 percent in the previous survey. Rents are expected to increase by 43 percent of respondents compared to 39 percent in Q4 and the average increase is expected to be 3.2 percent up from 2.8 percent last quarter.
Americans cite income, credit history and down payment as the biggest obstacles to homeownership with credit history being the top reason given by renters. Seventy-one percent of delinquent borrowers and 41 percent of renters feel their income is insufficient to meet their current expenses.
Sixty-seven percent of respondents believe it is a good time to buy a house compared to 65 percent in the last survey but three percentage points below the responses in the first quarter of 2010. Sixty-six percent said they believe buying a home is a safe investment, an improvement of 2 points since Q4 2010 but 17 percent below the responses in 2003. Even though opinions of the safety of homeownership have declined fairly steadily since the 2003 survey, 57 percent still feel that a home has potential as an investment and outranks other alternatives.
Among all respondents buying a home was thought superior to renting by 87 percent, an increase of 3 points from Q4. This opinion however was shared by only 74 percent of renters, a decrease of 13 points in one quarter.
As in the last survey, respondents continue to rank non-financial considerations such as having a good place to raise and educate children (78 percent) and safety (76 percent) as driving the desire to own. Only 63 percent listed the perception that renting is a poor investment.
Less than half (44 percent) of homeowners think their home is worth at least 20 percent more than they paid for it, down from 46 percent in June and 51 percent in January of last year. The number of homeowners who believe their mortgages are underwater has dropped from 30 percent to 23 percent but the number of homeowners who say they are stressed by this has increased from 35 to 46 percent. Still, 90 percent of those who are underwater have not considered defaulting on their mortgage but 27 percent think it is OK to do so if faced by financial distress. This is an increase of 13 points since the first quarter of 2010. Most (87 percent) of Americans disapprove of defaulting even if the mortgage is underwater or the owner is facing financial distress, a number that remains fairly constant.
Only 20 percent of those surveyed said their income has increased significantly over the last year while 59 percent reported it essentially unchanged and 47 percent said it is significantly lower. When asked if they expect this aspect of their lives to improve over the next year 42 percent said yes, an increase of 2 points while 15 percent, a decrease of 2 points said they expected it to get worse.
Monthly household expenses are significantly higher than a year ago for 40 percent of respondents, up from 34 percent last quarter and 31 percent a year ago. Among delinquent borrowers 47 percent reported higher expenses. The report noted that there was a 9 point spike in March in the number of all Americans reporting higher expenses compared to the previous two months in the quarter.
Among delinquent borrowers one-third have considered defaulting on their mortgages compared to only 5 percent of all mortgage holders and 20 percent said they have seriously considered it. Forty-four percent of delinquent borrowers say they would be more likely to rent their next home than buy, up 4 points from one year earlier. The average delinquent borrower pays 11.6 percent more of his income on mortgage payments than all mortgage borrowers.
A majority of renters (65 percent) say they would buy at some point in the future even though they are more likely to continue renting after their next move; 31 percent say they will always rent, down 3 points from last quarter. Four out of five renters say that buying a home would entail making a financial sacrifice and 61 percent of minority respondents called it a "great deal" of sacrifice.
Americans cite income, credit history and down payment as the biggest obstacles to homeownership with credit history being the top reason given by renters. Seventy-one percent of delinquent borrowers and 41 percent of renters feel their income is insufficient to meet their current expenses.
African Americans are more optimistic about the survey topics than the general public; 61 percent expect their personal finances to improve in the next year compared to 42 percent of the general population and 44 percent think the economy is on the right track compared to 33 percent of the larger sample. Hispanics showed similar optimism with 59 percent expecting an improvement in personal finances and 74 percent viewing home ownership as a good way to build up wealth compared to 59 percent of the general population.
Generation Y respondents, those 18 to 34 years of age, were also more upbeat than others with 59 percent expecting an improvement in personal finances and 62 percent perceiving home ownership as a safe investment.
Fannie Mae first conducted this survey in 2003 and has conducted it quarterly since the beginning of last year. The current survey covers the first quarter of 2011 and involves telephone interviews with 3,403 Americans over the age of 18. A 3,003 case random sample included 781 outright homeowners, 841 renters and 1,261 mortgage borrowers, 297 of whom self identified as underwater, i.e. owing at least 5 percent more on their mortgage than the value of their home. There was an additional random oversample of 400 delinquent borrowers included in the survey.
