Consumer Confidence, Spending, GDP

Fannie Mae Finds Consumers Expect Home Prices to Hold Firm in 2011

Posted on Thursday, March 17, 2011

Fannie Mae’s latest national housing survey finds that Americans are more confident about the stability of home prices than they were at the beginning of 2010, even though they lack confidence in the strength of the economy.
The GSE’s fourth quarter survey, conducted between October 2010 and December 2010, polled homeowners and renters to assess their confidence in homeownership as an investment, the current state of their household finances, views on the U.S. housing finance system, and overall confidence in the economy.
Seventy-eight percent of respondents said they believe housing prices will hold steady or increase over the next twelve months, up from 73 percent who answered the same in January 2010.
However, despite increased confidence in the recovery of home prices and the undisputable connection between housing and the macroeconomic picture, almost two-thirds (61 percent) of survey respondents said they believe the economy is on the wrong track.
That percentage is virtually unchanged from the number of respondents citing the same response a year ago, which further drives home the point made by the nonprofit counseling agency CredAbility a few weeks ago that despite claims the economic recovery is underway, the effects of any improvement thus far have yet to trickle down to the average consumer.
Commenting on Fannie Mae’s latest survey results, Doug Duncan, the GSE’s VP and chief economist, said, “Over the course of the last year, we gained deeper insights into Americans’ confidence in the strength of the housing market and the economic recovery.”
Not only do more Americans believe housing prices will remain stable over the next year, but, Duncan added, “We also are seeing encouraging signs in the positive attitudes toward homeownership among younger Americans, despite the severe impact of the housing crisis on Generation Y.”
Based on Fannie Mae’s survey results, younger Americans are generally more positive about owning a home than the general population. Fifty-nine percent of Generation Y (ages 18-34) believes buying a home has a lot of potential as an investment, even though this age group suffered the steepest decline in homeownership during the housing crisis – from nearly 44 percent when home prices peaked to under 40 percent in 2009.
Despite these positives, Duncan said, “[M]ost respondents to our survey continue to lack confidence in the strength of the economic recovery, and they are less optimistic about their ability to buy a home in the years ahead. This sense of uncertainty is weighing on the housing recovery today and reshaping expectations for housing for the future.”
Overall, the percentage of Americans who believe that buying a home is a safe investment declined to 64 percent over the course of the year, from 70 percent in January 2010, Fannie Mae said. This figure is down sharply from a similar survey conducted in December 2003, when 83 percent of the general population thought buying a home was a safe investment.
During 2010, survey respondents increasingly expressed a strong belief that it will be harder for future generations to obtain a mortgage. Three-quarters of those surveyed in the fourth quarter (74 percent) believe it will be harder to get a mortgage in the future, up from just over two-thirds at the beginning of 2010.
One out of three delinquent borrowers continues to say they have considered defaulting on their mortgage, Fannie Mae also reported. However, that number fell from 39 percent at the beginning of 2010 to 31 percent in the fourth quarter.
The number of delinquent borrowers who say they have seriously considered defaulting also has declined, from 25 percent
By: Carrie Bay, DSNEWS


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