NO END IN SIGHT
Both homeowners and renters are more cautiously optimistic during the first quarter of 2011 than in the fourth quarter of 2010, according to Fannie Mae’s latest national housing survey. However, they continue to lack confidence in the overall strength of the housing market and economic recovery.
The First-Quarter 2011 Fannie Mae National Housing Survey polled homeowners and renters between January 2011 and March 2011. Findings were compared to similar surveys conducted throughout 2010 and December 2003.
Survey results show that Americans’ new-found optimism about home prices, the economy and personal finances is offset by concerns about rising household expenses, which may require Americans to remain cautious about the recovery.
“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.”
In comparing the past and current surveys, the number of Americans who perceive homeownership as a safe investment has been declining (from 83% in 2003 to 66% in first quarter of 2011). However, 57% said they still believe that buying a home has a lot of potential as an investment, more than any other investment tested.
Other Fannie Mae Survey Highlights
Nearly one in four (23%) mortgage borrowers say they are underwater, compared with 30% in January 2010. 46% of underwater borrowers say they are stressed about their ability to make payments on their debt (versus 35% in June 2010 and 33% of all mortgage borrowers). And, nearly twice as many underwater borrowers (27%) think it is okay to walk away from a mortgage if they face financial distress than in January 2010.
44% of homeowners said they believe that the value of their home today is worth 20% or more than what they originally paid for it, declining from 46% in June 2010 and 51% in January 2010.
One in three Americans (30%) expect home prices to strengthen over the next year, up four percentage points from the fourth quarter of 2010, but virtually unchanged from a year ago.
Separately, Freddie Mac released its U.S. Economic and Housing Market Outlook for May showing a pick-up in economic growth in the second half of 2011 but with unemployment lingering above 8% through year-end. A large number of workers unemployed for a long period remain the predominant force behind seriously delinquent rates on mortgages.
“While the labor market is moving in the right direction, it still has a long way to go before the unemployment rate moves sharply lower. And ditto for seriously delinquent rates on mortgages,” said Frank Nothaft, Freddie Mac, vice president and chief economist.
Nothaft noted that more than 250,000 new jobs are needed monthly, on a sustained basis, to reabsorb all the jobs lost since the recession.
Freddie Mac Outlook Highlights
During the first quarter of 2011, home prices decreased by 2.8% nationwide.
The rate of seriously delinquent mortgages (8.6% average) will likely trend lower during 2011, but continue to remain at extraordinarily high levels for an extended period.
Positive signs: homebuyer affordability remains extraordinarily high, mortgage rates low, house prices are well off their cyclic peak and contract signings for existing home sales are up. Freddie Mac is projecting a 5% increase in 2011 home sales over 2010, on a calendar year basis.
