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Majority of Americans Have High Hopes for Home Values
A second annual consumer survey by RBC Capital Markets conducted last month found that the majority of all home owners remain optimistic about the value of their home even in the face of the current market slowdown and have accumulated sizable amounts of equity.
Nearly half of all home owners expect to see at least 5% annual increases in the value of their homes over the next few years, which is perhaps too optimistic, RBC said, but down from almost 60% last year.
The survey results from more than 1,000 online respondents also showed that 25% of home owners have already paid off their mortgages, twice the 13% who reported they had variable-rate or interest-only mortgages.
More than 80% of the home owners surveyed said they had built up at least $50,000 in equity in their homes, and almost 60% said they had at least $100,000 in equity.
The RBC poll did detect concern among buyers who entered the market at the end of the housing cycle with riskier mortgages that will have to be renewed. Nearly 40% with variable-rate and interest-only loans reported that they are concerned about their ability to meet the higher payments looming in the future, although 13% said they hadn’t given the ramifications much thought. These two responses came from a fairly small 6% segment of all survey participants.
“While real estate expectations are lower than they were last year, consumers seem optimistic despite what we are seeing in the marketplace,” said Scot Ciccarelli, managing director and equity research analyst for RBC. “Declining real estate values could eventually impact consumer spending as people don’t feel as wealthy as they used to and become less likely to borrow against the equity they have built up in their homes.”
And while people have built up substantial equity in their homes over the years, Ciccarelli said he was very concerned about many people with risky mortgages who “seem ill-equipped to handle the higher payments they will eventually incur.”
Beyond housing, the survey found:
- Price remains the single biggest focus for consumers when they are shopping (51%), followed by “getting the right product” (35%). Those with the highest incomes were more concerned about the right product (47%) than the price (33%); and those most concerned about getting the right product were more likely to use the Internet for shopping — 38% compared to 20% of price-driven consumers.
- Half of the respondents said that they don’t expect to change their spending habits over the next year. For those who do expect to change, the spending will decrease in most categories — with the exceptions of home improvements and automobiles.
- The biggest worries for consumers are geopolitical tensions and terrorism (28%), followed by gas prices (20%), rising medical bills (20%), employment concerns (13%) and interest rates (9%).
Stamford, Conn.-based InsightExpress assisted in the survey, and the results were announced on Sept. 27 at the RBC Capital Markets Consumer Conference in Orlando, Fla.
 Attend the NAHB Construction Forecast Conference
Don't miss NAHB's fall Construction Forecast Conference for the latest economic news about the housing industry. Join NAHB on Oct. 25 for the Construction Forecast Conference — Fall 2006 in Washington, D.C.
If you can't attend in person, sign-up for the Webcast.
To register for either, visit www.nahb.org/cfc.
Want to Know the Housing Starts Through 2014?
Find out in HousingEconomics.com’s Long-Term Forecast.
HousingEconomics.com includes downloadable Excel tables featuring the housing starts forecast, GDP, demographics and more.
To learn more, visit www.housingeconomics.com.
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