Housing Survey Shows Increasing Pessimism about Economy

Each National Housing Survey conducted quarterly by Fannie Mae gathers baseline data on attitudes of the nation's homeowners and renters on homeownership, the economy, and individual financial situations, but each also focuses on a specific aspect of the responders' attitudes.  The third quarter survey, results of which were released on Thursday, provides in-depth information on attitudes of consumers who know someone who has defaulted on a mortgage.  The data indicates that being exposed to default does not noticeably change attitudes toward homeownership, but there is greater pessimism about the economy and personal financial prospects among those consumers who know defaulters.

The survey questions about 3000 respondents in rolling panels.  These respondents are divided among outright owners of their home (751), owners with mortgages (1,261), renters (841) and non-rent paying boarders (150).  The basic survey questions revealed a declining optimism among respondents.  Asked whether the country was on the wrong or the right track, 75 percent responded wrong track as compared to 64 percent in the Q2 survey while 18 percent said right track, down 10 percentage points.  Asked if they expected their own personal finances to improve over the next year, 36 percent said they expected improvement compared to 39 percent last quarter; 20 percent said things would get worse, up from 16 percent.  Asked the same question retrospectively, i.e. have your finances improved in the last 12 months, the answers, which have remained virtually unchanged through the last three quarters, were that finances were better, 24 percent; worse, 30 percent; unchanged, 46 percent.

Seventy-five percent of respondents feel it will be harder to buy a home in the future, a sentiment that has remained steady for the last seven quarters.  However 62 percent of current homeowners and 56 percent of renters feel that it is currently a good time to buy a house.  Only 12 percent and 18 percent think it is a good time to sell.  Good idea or not, only 12 percent of all respondents said it was likely or very likely they would buy a home in the next 12 months, and 44 percent said they never intended to move again.

Doug Duncan, vice president and chief economist of Fannie Mae said of the survey, "At the macro level, we see that economic activity picked up in the third quarter, thanks to a sizable rebound in consumer spending on services. However, the hike appears to have come out of consumers' savings, as disposable income fell during the quarter.  "The improvement in consumer spending has not spilled over into big-ticket items such as housing, as consumers' concerns over their finances and dissatisfaction about the direction of the economy remains elevated."

As to the special attitudinal questions, Duncan said, "Knowing someone who has defaulted on their mortgage appears to be correlated with consumers being slightly more pessimistic about the direction of the economy, their finances, and their ability to obtain a mortgage, but does not materially correlate with their desire to own a home or their view of housing as a safe investment."

Survey respondents included 878 owners and 313 renters who know defaulters and 1,134 owners and 528 renters who do not.  Knowing a defaulter appeared to make little difference in the responses in most cases.  For example, 92 percent of owners who knew a defaulter said owning makes more sense than renting, compared to 89 percent of owners who did not know one.  Attitudes toward housing as an investment appear more a function of current homeowner status than who the respondent knows.  Sixty-seven percent of owners and 52 percent of renters who know defaulters say buying a home is a safe investment, compared to 70 percent and 52 percent who do not know defaulters.  Seventy-eight percent of owners and 39 percent of renters who know defaulters say they are likely to buy their next home rather than rent compared to 73 percent of owners and 35 percent of renters who do not know defaulters.

Where knowing someone who had defaulted did seem to make a difference was on several measures related to the broader economy and personal financial prospects.  There, knowing a defaulter resulted in higher levels of pessimism.  For example, 80 percent of owners and 74 percent of renters who know defaulters say the economy is on the wrong track, compared to 75 percent of owners and 70 percent of renters who do not know defaulters.  Nine percent of owners and 21 percent of renters who know defaulters are very stressed about their ability to make payments on their debts, compared to 4 percent of Owners and 12 percent of Renters who do not know defaulters. 

Interviews were conducted by Penn Schoen Berland, in coordination with Fannie Mae.