It’s no surprise that consumers are skeptical about whether buying home is a safe investment in the midst of the mortgage crisis, and a recent survey by Fannie Mae released this month confirms that. But while the American Dream has faded, it’s not yet dead.
An overwhelming majority – 83 percent – believed in 2003 that homeownership was safe. That dropped to 70 percent in January 2010. In June of this year it dropped again to 67 percent, the lowest level of confidence ever recorded according the report.
The popularity of homeownership is even lower among potential first-time buyers. Among renters surveyed, 54 percent believe that buying a home is safe.
Growing uncertainty about the risks of homeownership may be slowing purchases. Even though 70 percent of respondents believe that low prices and interest rates make this a good time to buy a home, 33 percent said they’re more likely to rent than to buy a house, up from 30 percent in January. With only 70 percent of respondents believing that the economy is on the right track, one-fifth of all renters surveyed said they recently delayed plans to buy a home.
Among renters who say they would rather buy, 63 percent said they plan to buy a home in the future. That represents a four-percent drop since January.
Such reluctance means that more families “are paying down debt and putting their financial house in order,” Douglas Duncan, Fannie Mae’s chief economist, told the Wall Street Journal. Just over a quarter of current homeowners said they have significantly reduced their mortgage debt over the past year.
The report was not entirely a downer. Consumer confidence may be resurging – 70 percent of respondents said that now is a good time to buy, up from 64 percent in the beginning of the year. And 84 percent agreed that buying makes more financial sense than renting.
But many people doubt their ability to take advantage of the market. Just over half of homeowners said it would be more difficult for them to obtain a mortgage today. Seven in ten believe it will be even harder for future generations to get loans.
Attitudes may be changing slightly toward people who walk away from their homes. Only ten percent of survey takers believe that it’s acceptable to stop making payments on an underwater mortgage. That’s up from eight percent in January.
Photo credit: http://www.flickr.com/photos/billjacobus1/125058134/
Chris Maag is a freelance journalist for publications including The New York Times, TIME magazine and Popular Mechanics. He graduated with honors from the Columbia University Graduate School of Journalism, and has worked as a staff writer for daily newspapers, monthly magazines, alt weeklies and websites. Maag writes about people with big dreams set on little stages, including a teenage girl who races jet-powered tractors, and people who make millions of dollars impersonating Barack Obama.
Christopher Maag Contributing writer for Credit.com, Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics. Reach Chris via email at chris@credit.com.
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10 percent of people surveyed believe that it is okay to stop paying if the home decreases in value. How about the sense of obligation and responsible borrowing.
If we as a society don’t preach and follow the proper and ethical ways to do business we ate doomed to fail.
A homeownership is not necessarily an investment. If you chose a good size home, in a good location next to the kids school or your place of employment, the tax benefits alone make it enticing for anyone to become a homeowner.
The problem is most people can’t differentiate between regular everyday life and the world of investing. They confuse a home with an investment property and that the core of the problem. It can all be solved with good education and training. But people are even getting skeptical of what’t being taught. Let’s go back to basics of owning a home, saving and investing over a period of time and everyone will make it in the long run.
Very good points Cherif.
I bought my home in 2005 at the tail end of the bubble. I didn’t know there was a bubble really, but I really wanted to get out of my crappy apartment and my lease was up. I had no savings but i thought i was paying off my cc debt (I wasn’t, i ended up doubling it from 26K to 46K). Lucky for me they were lending money, and FHA gave me the down payment. I moved next door to a young yuppy couple who had rental income from an investment condo and were anxious to flip their new house. The young woman talked all about remodeling and landscaping to increase its value. Something happened and they filled up the back yard with gravel and rented it out for a year. Then something else happened and the house sat vacant until Fannie Mae turned off the water and put a lock on the front door. Their “investment” now has dead landscaping and overgrown weeds. Meanwhile, back at my place, i’m struggling to live on my own because i bought on the upper end of my affordability. I could afford it, but it meant a tight budget. I ended up going into more debt. When my boyfriend moved in I payed off half my debt to what i was before but still at 22K. Money is super tight every month and the yard is still not landsaped.. Everyone asks me, why don’t you just walk away? Why should I? Its my house. I need a place to live and I love it. Where would I go? I am responsible for my debt. I’m the one who spent the money, I’m the one who owes it, not the taxpayer, not the bank. I’ll do it, and when I’m done, my credit report will be g.l.o.w.i.n.g. Then in a couple of years we will see who is ready to invest in some property. Me, that’s who.