Fannie Mae Housing Survey – Consumers Believe Prices Have Bottomed But Prefer To Rent

The large and continuing decline in asset values has been one of the greatest contributing factors to loan defaults and subsequent banking failures.  Today’ release of Fannie Mae’s National Housing Survey provides good news for banks if consumers are correct in their belief that housing prices have bottomed.

The survey reveals that 78% of Americans believe that the housing market has hit a bottom and that prices will either increase or remain stable over the next year.  Since market bottoms are rarely made when the large majority of people are bullish, students of market cycles can persuasively argue that the survey results are a bearish indicator for the housing market.

Despite the overwhelmingly bullish view on future housing prices, other consumer responses to the survey indicate mixed results on the outlook for housing.  According to Fannie Mae’s Chief Economist, Doug Duncan, “These findings indicate a return to a more balanced and realistic approach toward housing. While this will likely weigh on the housing recovery in the near-term, it should, over time, help to build a stronger and healthier market focused on sustainable homeownership.  Although most Americans believe that home prices have bottomed, they are adopting a much more cautious approach toward buying.  Homeowners and renters alike continue to be wary of taking on risk, and they are less confident in the long-term outlook for housing.”

The survey indicated that 70% of Americans believe it is a good time to buy a house but 33% said they would more likely rent their next home if they were to move.

Overview of key findings of the survey:

Consumers More Confident That Housing Market Has Bottomed, But Less Certain About the Future

  • A large majority of Americans (78 percent) believe that home prices either will remain flat or go up over the next year, up five points from the beginning of the year. Forty-seven percent believe prices will hold steady, while 31 percent think they will go up. This is a notable shift from January 2010, when these numbers were 36 percent and 37 percent, respectively.
  • A majority of Americans (67 percent) continue to believe that buying a home is a safe investment, although this is down three points since January and 16 points since 2003. Housing ranked second behind putting money into a savings or money market account (76 percent).
WILL HOME PRICES GO UP?

WILL HOME PRICES GO UP?

Consumers Continue to Be Cautious in Housing Decisions

  • A majority of renters said they would be more likely to rent their next home if they were to move, increasing significantly from 54 percent in January to 60 percent in July, even though 69 percent of renters think it makes more sense to buy a home.
  • Twenty-two percent of mortgage borrowers said they have reduced their mortgage debt significantly in the last year, and 27 percent of the mortgage borrowers say they have reduced their non-mortgage debt significantly.
RENT VS BUY

RENT VS BUY

Views on Homeownership Diverge Among Sub-groups

  • The survey also found that mortgage borrowers and underwater mortgage borrowers are less discouraged about homeownership, but delinquent borrowers and renters are growing more pessimistic.
  • Mortgage borrowers (74 percent) and underwater borrowers (69 percent) are more likely to say owning a home is a safe investment than delinquent borrowers (57 percent) and renters (54 percent). However, this measure has fallen among all sub-groups since January, with delinquent borrowers and renters showing the largest declines, down eight and seven points, respectively.
VIEWS ON DEFAULT

VIEWS ON DEFAULT


Comments

  1. Thanks for this article very informative.

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