Despite uncertain economic times, most Americans still value home ownership.
By Gino Blefari
How’s the real estate market? It’s a question every one of us in this business is faced with every day. Homeowners, buyers and sellers seem to have honed a hyper-awareness for the state of the economy, how it impacts home values – or real estate prices in general – and how it impacts their personal finances. This is no surprise given the times we’re living in.
Just when things seem like they are looking up (sales of existing homes increased 7.7% to a rate of 5 million in August, up from 4.67 million in July), we get a reality check of how Americans are feeling about the state of housing. A survey released by Fannie Mae this week showed that for the most part, people are still very pessimistic about the current economy, home prices and household finances. How people view the economy is actually pretty important to our recovery – meaning, if they view things as really bad, they’re not going to buy or sell until they change their minds or circumstances force them to change.
The most interesting thing about Fannie Mae’s September survey is that the majority of respondents said they’d buy their next home rather than rent: 63% said they would buy their next home if they were going to move, up 1 percentage point since August. Only 32% said they’d rent their next home, which is down 2 percentage points since the previous month.
If Americans are so pessimistic, why would they commit to such a large financial obligation? The answer is simple: They view buying conditions as really good:
lowest mortgage interest rates anyone can remember
a firm belief that home prices will fall over the next year
a firm belief that rents will continue to rise.
We can also deduce from this that Americans still value homeownership – despite uncertain economic times. Owning still makes sense to most people over the long term. And perhaps Americans are even feeling like homeownership is the one certainty they can count on in the long term to provide some form of financial security if the rest of the economy gets its act together.
If all these people say they’d rather buy than rent their next home, then why aren’t we seeing soaring sales? As noted above, many are expecting more problems with the economy and financial situations to get worse. 19% of respondents in Fannie Mae’s survey said they expect their own financial situations to worsen over the next year. While that’s actually down a bit from August when it was 22%, it’s still a significant figure to think about. One-fifth of people on average are bracing for more bad news.
What can we do? We can stop and think about the true state of the real estate market and how heavily impacted it can be by something as intangible as the way people are feeling about the economy, cost of living, job security and personal finances. Just because home sales start trending up doesn’t mean we’re in the clear, and when we see them stumble doesn’t mean homeownership is any less valuable to Americans.