Americans are still waiting for the housing market to hit bottom according to survey data released this week from the Third Quarter Fannie Mae National Housing Survey. It found that a declining number of both homebuyers and renters think this is a good time to buy and an overwhelming and growing majority are quite sure it's a bad time to sell.
The survey was conducted among 3,417 homeowners and renters during July, August and September. A random sample of 3,015 of members of the general population which included 834 outright homeowners, 894 renters, and 1,156 mortgaged homeowners of whom 305 were self-identified as being underwater on their mortgages were interviewed by phone. The survey also included an oversample of 402 randomly selected borrowers who had not paid on their mortgages in at least 60 days. Survey results were compared to similar surveys conducted in January and June of this year and in December 2003.
The percentage of Americans who think it is a good time to buy a home declined by two percentage points from the June survey to 68 percent while 29 percent feel it is a bad time, an increase of 3 points. In June 83 percent of respondents viewed it as a bad time to sell, a figure that rose to 85 percent in the recent survey.
The margin separating those who expect home prices to rise during the next year from those who expect them to fall has narrowed significantly. In June 31 percent were looking for an increase while 18 percent expected further declines. The current numbers are 25 percent and 22 percent respectively. The survey found that delinquent borrowers and persons who owned their homes mortgage-free were more pessimistic about housing prices while borrowers who were underwater on their current mortgage and renters were looking for a modest (1 percent or less) price increase.
At the same time, an overwhelming majority - 80 percent to 20 percent - are looking for rents to go up although in June the average expectation was for a 3.6 percent increase and today it is 2.8 percent.
"Consumer attitudes toward buying a home are more negative since last quarter," said Doug Duncan, Vice President and Chief Economist, Fannie Mae. "Our survey shows that Americans' declining optimism about housing and their personal finances is reinforcing increasingly realistic attitudes toward owning and renting."
66 percent of American view homeownership as a safe investment, down 1 percent from June but 17 points since the 2003 survey. The percentage was significantly higher among homeowners, even if their mortgage is underwater (71 and 72 percent) than it is among delinquent borrowers (54 percent) or renters (56 percent.) Delinquent borrowers, in fact, are 10 percent more likely to rent their next home than they reported in January. 50 percent said they would prefer to rent compared to 45 percent who would buy. Half of all respondents ranked homeownership as less safe than putting money into a bank account.
That their situation has taken a toll is evident in other responses from the delinquent borrower group. More than half (54 percent) say they are very stressed and 82 percent say they are stressed. Both numbers are up 1 point since June. Owning their home entailed a financial sacrifice for 88 percent of these borrowers with 69 percent saying they are making a great deal of a sacrifice. These borrowers are also falling further into debt with 29 percent saying they have significantly increased their mortgage debt during the past year compared to 23 percent of other borrowers who have reduced their debt. Seven out of 10 believe that their income is insufficient to cover their expenses while the 71 percent of the general population perceive their incomes as adequate.
When asked about other aspects of their personal finance, 58 percent of Americans say that their household income has remained flat for the past year while 48 percent of delinquent homeowners report a significant decrease. In June the figure was 46 percent. The percentage of Americans who feel their personal finances will improve, at 41 percent, is for the first time, equal to the percentage who foresees no improvement.
Forty-two percent of Americans know someone who has defaulted on a mortgage, an increase of 3 percent since June, a figure that is much higher among delinquent and underwater borrowers at 63 percent and 58 percent respectively (compared to 56 percent and 48 percent in June.) Respondents who know someone who has defaulted are more likely to have considered doing so themselves although the numbers among most subgroups are small. However, in the case of delinquent borrowers who know a defaulter, 45 percent had considered defaulting compared to 16 percent who did not know a defaulter. But default is not viewed as a free pass. 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.
HERE is Fannie Mae's Presentation of the Housing Survey Data. It contains many useful graphs and tables.