Confidence Rising: 78% Say Home Prices Have Bottomed Out

Better than three-quarters of the American public believe that home prices have bottomed out according to a new study by Fannie Mae.

The Fannie Mae findings are good news in the sense that real estate cannot be sold short, no one benefits from lower home prices. A belief that home values are rising is one sure way to encourage real estate purchases and thus — in circular fashion — increasing real estate prices.

Fannie Mae’a National Housing Survey found that respondents believe home prices will hold steady (47 percent) or increase (31 percent) over the next year, and that rental prices will stay the same (46 percent) or go up (39 percent). Across the general population, the average expected rise in rental prices is four times that of home prices (3.6 percent versus 0.9 percent).

Fannie Mae also found that 70 percent of Americans think it’s a good time to buy a house, compared with 64 percent in a similar survey conducted in January 2010. But 33 percent — up from 30 percent — of all respondents said they would be more likely to rent their next home if they were to move.

The big caveat with the survey, of course, is that real estate is a localized commodity. What people think nationally is less important than what people think about that house down the street. One suspects that the survey questions would draw vastly different responses from individuals in Phoenix when compared with residents of Nebraska.

Key Findings

  • A large majority of Americans (78 percent) believe that home prices either will remain flat or go up over the next year, up five points from the beginning of the year. Forty-seven percent believe prices will hold steady, while 31 percent think they will go up. This is a notable shift from January 2010, when these numbers were 36 percent and 37 percent, respectively.
  • Thirty-nine percent think rental prices will increase over the next 12 months, while 46 percent said they will stay the same.
  • Consumers continue to believe it is a buyers’ market; 70 percent said it is a good time to buy a house, up six points from January. However, 83 percent believe it is a bad time to sell a house.
  • A majority of Americans (67 percent) continue to believe that buying a home is a safe investment, although this is down three points since January and 16 points since 2003. Housing ranked second behind putting money into a savings or money market account (76 percent).
  • Fifty-four percent think it would be very difficult or somewhat difficult to get a home loan today, down six points since January. However, 71 percent of Americans think buying a home will be harder for the next generation, up three points since January.
  • The number of respondents who said they would be more likely to rent rather than buy their next home if they were going to move increased from 30 percent in January to 33 percent in July.
  • A majority of renters said they would be more likely to rent their next home if they were to move, increasing significantly from 54 percent in January to 60 percent in July, even though 69 percent of renters think it makes more sense to buy a home.
  • Twenty-two percent of mortgage borrowers said they have reduced their mortgage debt significantly in the last year, and 27 percent of the mortgage borrowers say they have reduced their non-mortgage debt significantly.

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