Real Estate Market

Consumers grow more bearish on home ownership

by Broderick Perkins

(11/29/2010) - Home ownership, long considered a cornerstone of a strong economy, continues to decline in popularity as a safe investment.

Fannie Mae polled home owners and renters between July 2010 and September 2010 and compared those findings with similar surveys conducted in June 2010, January 2010, and December 2003 and found Americans growing ever more wary of buying a home and less certain that the housing market has bottomed.

That jibes with expert forecasts.

Two recent surveys, from other sources, predict the housing market won't begin to recover until late 2010.

While 66 percent of Americans thought buying a house was a safe investment in the third quarter this year, the percentage was down 1 percentage point from June 2010, down 4 percentage points from January 2010, and down 17 percentage points from 2003, according to Fannie Mae's third quarter 2010 National Housing Survey.

The survey also found fewer Americans convinced it's a good time to buy a home (68 percent, down 2 percentage points since June). More Americans think it is a bad time to buy (29 percent, up 3 percentage points).

Similar to the last survey, an overwhelming majority of Americans said it is a bad time to sell a home (85 percent, up 2 percentage points since June).

"Our survey shows that Americans' declining optimism about housing and their personal finances is reinforcing increasingly realistic attitudes toward owning and renting" said Doug Duncan, Vice President and Chief Economist, Fannie Mae.

Only 25 percent of respondents think that home prices will rise during the next 12 months (6 percentage points lower than in June), while 22 percent expect home prices to decline (4 percentage points higher).

Americans continue to believe that rental prices will rise more than home prices and continue to believe that rental prices will go up rather than go down by a ratio of almost 4 to 1 (Americans expect rental prices to rise by 2.8 percent over the next year, compared to 3.6 percent in June).

For the first time, delinquent borrowers were more likely to say they want out of home ownership and would rent rather than buy their next home — 50 percent would rent (up 10 percentage points since January) and 45 percent would buy (down 11 percentage points since January).

More than half of delinquent mortgage holders are very stressed about their debt, and, unlike most Americans, are falling into more debt — 29 percent of delinquent borrowers have significantly increased their mortgage debt during the last year, almost three times the percentage of mortgage borrowers who did so.

The survey also found:

• Forty-two percent of Americans, 63 percent of delinquent borrowers, and 58 percent of underwater borrowers (up 3, 7, and 10 percentage points since June, respectively) said they know someone who has defaulted on a mortgage.

• Those who know defaulters were more likely to have considered defaulting themselves. However, delinquent borrowers are nearly three times as likely to have considered stopping their mortgage payments completely if they know someone who has defaulted on their mortgage, and are more likely to know a strategic defaulter (someone who stops making mortgage payments despite having the financial capacity to pay them) than they were in June.

• Fifty-five percent of underwater borrowers, 51 percent of all mortgage borrowers, and 43 percent of delinquent borrowers (up 11, 6, and 6 percentage points since January, respectively) think their lender would pursue other assets in addition to their home if they defaulted on their mortgage.

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