Poor Credit Tops List of Homeownership Barriers. Rents Seen Rising

by devteam March 1st, 2011 | Share

Fannie Mae’s latest National Housing Survey shows thatrnAmericans have markedly changed their perception of homeownership. </p

The most recent survey,rnconducted between October and December 2010, revealed that 64 percent ofrnrespondents felt buying a home was a safe investment.  This is 6 points below the responses given inrna January 2010 survey and 19 points below the answers to an initial surveyrnconducted in 2003.  Persons who arerncurrently renting or who are delinquent on their mortgages ranked home owning lower with 53 percent of both subgroups feeling a home was a safe investment.</p

But at the same time, 84 percent of consumers believe thatrnowning a home makes more sense than renting, a number that has remained relativelyrnstable since the January 2010 survey. Respondents gave, as positive reasons for homeownershiprnthe quality of local schools (79 percent) and safety (also 79 percent.)  These ranked far ahead of any financialrnconsiderations such as tax benefits or a belief that paying rent makes lessrnsense.   Amongrnrenters 28 percent thought renting made more sense.  </p

The National Housing Survey was conducted by phone withrn3,407 Americans age 18 and up.  Thernsample included a random group of 3,004 members of the general population madernup of 751 homeowners, 1,232 mortgage borrowers, and 871 renters.  An oversample of 403 random delinquent borrowersrnwas also contacted.  Fannie Mae conductedrnsimilar surveys in January and June 2010 and from July to September 2010 and inrn2003.  The survey reported out some ofrnits findings among subsets which included renters, delinquent borrowers,rnAfro-Americans, Hispanics, and “Generation Y” (adults aged 18 to 34.)</p

Americans have grown more confident about the stability ofrnhome prices than they were one year ago although this is not matched by theirrnattitudes regarding strength in the economy. rnA majority (78 percent) feel that home prices will either stay the samernor go up (73 percent held this position in January) versus 19 percent whornexpect further declines.  Expectationsrnamong the 26 percent expecting an increase were modest; the average projectedrnincrease was 0.4 percent.  </p

A larger sharernof respondents – 39 percent – expect rents to increase over the next year withrnthe average estimate of increase at 2.8 percent.</p

“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,” said Doug Duncan, Vice President and Chief Economist of Fannie Mae. “More Americans believe that housing prices will remain stable over the next year. 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. But most 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.”</p

Consumers’ own financial situations have not improved overrnthe last year.  Six in 10 respondentsrnsaid their monthly household income has remained about the same compared tornJanuary 2010 while nearly half of the delinquent borrowers reported arnsignificant decline.  Significantlyrnhigher expenses were reported by 34 percent of respondents and 22 percentrnreported significant declines.     </p

Financial reasons were most frequently named as significantrnobstacles to owning a home; poor credit topped the list.  42 percent of renters and seventy-three percent of delinquent borrowers  cited income which is insufficient for their existingrnexpenses.   Seventy-nine percent ofrnrenters believe they would have to make a financial sacrifice to own a home andrn54 percent say it would require a “great deal” of sacrifice.</p

The number of delinquent borrowers who say they havernconsidered defaulting on their mortgage has declined from 39 percent in Januaryrn2010 to 31 percent and most Americans (86 percent) continue to disapprove ofrnstrategic defaults even when the home is underwater.</p

Despite being hit hard by the housing crisis which saw thernhomeownership rates in its age group drop almost four percentage points sincern2009 to 39.8 percent, Generation Y remains positive about owning a home.  Sixty-one percent of that subgroup in thernsurvey felt that buying a home is a safe investment.  They gave a higher value to the impact ofrnhomeownership on societal status and as a place to raise children than didrnother subgroups in the survey.</p

Minority groups have a more positive outlook towardrnhomeownership and the economy than the general population.  Fifty-none percent of Hispanics expect theirrnpersonal financial situation to improve over the next year compared to 78rnpercent of the general population and 40 percent of African Americans.  About a third of each of the two minorityrngroups say that it is likely they will buy a home in the next three yearsrncompared to about 25 percent of all survey respondents.  Both Hispanics and African-Americans are morernlikely, in most cases by double digits, to place a high value on homeownershiprnas a good place to raise children, a better way to provide an education forrnthose children, a motivation to be a better citizen, a place to keep yourrnfamily safe, and as a wealth builder than is the general population..  Only 38 percent of African Americans thinkrnthe economy is on the wrong track compared to 62 percent of the generalrnpopulation and 59 percent of Hispanics</p

HERE is the fact sheet</p

HERE are charts and infographics</p

MORE PERSPECTIVE: Homeownership Rate Hits 10 Year Low. Watch Out for Rent Inflation

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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