Americans Still Favor Homeownership as Safe Investment

(April 20) -- Just because homes aren't selling like hotcakes doesn't mean consumers have lost their appetite for a slice of the American Dream pie.

Despite an epic downturn that could leave the housing market reeling for years to come, the vast majority of consumers, 70 percent, remain bullish on home buying as one of the safest investments, according to a recent Fannie Mae report.

With only a handful of housing markets poised to recover and most housing markets still feeling around for the bottom, 65 percent of those surveyed continue to prefer owning over renting. And 64 percent say it's a good time to buy, a level surprisingly similar to the 66 percent voicing the same sentiment in 2003 -- just before the onset of the last boom market.

The optimism is, however, tinged with some pragmatic caution, according to findings of Fannie Mae's National Housing Survey, conducted between December and January.

The survey included a random sample of more than 3,000 consumers, about two-thirds homeowners (including several hundred underwater and owing at least 5 percent more than their homes were worth) and one-third renters.

But even as one in three of those surveyed said it is a very good time to buy a home, they also know it isn't easy. Sixty percent believe getting a mortgage is more difficult than it was for their parents, and 68 percent believe it will be even more difficult for their kids.

Among renters, 23 percent said they would purchase a new home later than originally planned.

Putting off buying a home isn't such a bad idea, if it means more time to prepare for what's likely the most expensive acquisition many people will ever make.

"Consumers are still committed to owning a home but are showing increased cautiousness, regardless of whether they rent, own their homes outright or have a mortgage," said Doug Duncan, vice president and chief economist with Fannie Mae.

"They are rebalancing their attitudes toward housing and homeownership by adopting a more realistic, long-term approach, and are less willing to take risks. This focus on sustainable housing is better for the economy, better for the housing market and better for America's families," Duncan added.

Tougher lending standards and the uncertain economy are what's making it tough for renters to buy and existing homeowners to move up.

Among renters, the most common reasons cited for choosing to be a tenant were the belief that their credit history is not good enough to qualify for a mortgage (54 percent) and that they couldn't afford to buy and handle the additional cost of upkeep (47 percent).

Among all survey respondents, the top obstacles to obtaining a home loan were poor credit (22 percent), insufficient income (19 percent), concerns over job security (15 percent) and having enough for a down payment (15 percent).

Other results from the Fannie Mae survey:

• Seventy percent said buying a home is one of the safest investments. Seventy-four percent said it's safest to put money in a money market or savings account, while 17 percent opted for the stock market.
• Eight in 10 believe homeownership is important to the economy, but only 31 percent think the economy is on the right track.
• Seventy-three percent believe housing prices are due to either stay the same or rise over the next year. However optimistic, that goes against the grain of another recent survey that suggests home values nationwide will fall an average 17 percent more before the market finally bottoms. NewObservations.net came to the conclusion by compiling data from major home price indexes of S&P/Case-Shiller, the Federal Housing Finance Agency, First American CoreLogic and Freddie Mac.

Given that there are millions of homeowners saddled with mortgages that are greater than the value of their homes, Fannie Mae also asked respondents about the duty to continue to pay such mortgages.

• Nearly nine in 10 Americans, including seven in 10 who are delinquent on their own mortgages, said they do not believe it is acceptable for people to stop making payments on an underwater mortgage. However, when a homeowner's financial distress was taken into account, 15 percent said it is acceptable to stop making payments on an underwater mortgage.
• Both delinquent mortgage borrowers and current borrowers are more than twice as likely to have seriously considered stopping their payments if they knew someone who had already defaulted.