Tuesday, 28 March 2017

Consumers: "What Housing Bust?"

Written by Posted On Monday, 25 June 2007 00:00

What's got residential real estate consumers so confident about the housing market?

In the first quarter, the rate of home price appreciation slowed in all but five of the 50 largest Metropolitan Statistical Areas and only five saw appreciation in the double digits in the first quarter of 2007, down from 26 in the first quarter of 2006, according to the Office of Federal Housing Enterprise Oversight.

Nine MSAs -- West Palm Beach, FL; Oakland, Sacramento, and San Diego, CA; Boston and Cambridge, MA; Detroit and Warren, MI; and Cleveland, OH-saw slight year-over-year price declines.

Two different reports both say an estimated 2 million people are forecast to lose their homes to the subprime snake and they face a rental market with rising rents.

Trouble with subprime mortgage-backed securities and employment-related fallout from the home building industry is beginning to chip away at the already brittle economy.

Why are most housing consumers so upbeat?

James M. Weichert, president of founder of one of the nation's largest privately-held real estate companies, Weichert Realtors, says it's just a matter of perspective.

"Much of the attention real estate is getting today continues to be based on comparisons to the past thanks to the record-breaking years we had earlier this decade," he said.

"But if you take a more forward-thinking approach, you see real estate is set for an upswing based on indicators such as home supply, interest rates and employment. Not only has it never been easier to find and afford that dream home than right now, but real estate remains one of the best long-term investments options."

Apparently, he's on to something.

Fifty-five percent of Americans say their home would sell for more money now than it would have a year ago. That's down from 59 percent last summer, but still a majority, according to a recently released survey by Michaels Opinion Research, Inc. conducted for the Boston Consulting Group.

The survey said 74 percent of homeowners were confident they could sell their home within the next six months at a price they think it's worth.

But the confidence is not just about selling homes for an asking price.

Consumers are confident because housing generated a great deal of wealth during the last boom market and, for many it's the cushion they need until happy days are here again.

Boston Consulting's survey reports 76 percent of Americans said the current real estate market has no impact on how they're spending now, even as 16 percent say they're cutting back because of a perception of lower residential real estate values.

Also, most homeowners, 69 percent, said they're likely to make renovations or improvements to their home in the next 12 months, a smart equity protection move in a soft market.

Another 27 percent said they're likely to purchase a better home over the next five years.

Americans also exude market confidence because they've come to understand the long-term benefits of homeownership.

Eighty-five percent of Americans believe their house will be worth more five years from now than it is today. A majority, 63 percent, said they believe real estate is a good or excellent investment.

Consumer confidence is not naiveté. Homeowners are aware of the potential economic fallout from a extended housing downturn.

Boston Consulting's survey reveals 49 percent of those surveyed said they believe the decline in housing prices is hurting the national economy "moderately," 15 percent said "severely" and 12 percent said it's not hurting the economy at all.

Fifty-two percent of Americans believe the current residential real estate slump will last two years or less. Only 22 percent believe it will last for five or more years, according to the survey.

"Consumers don't view blips in overall housing prices as a catastrophe. They take a very long-term perspective and don't move very often. Tales of the end of housing as the primary asset for American households are way over-told," says Boston Consulting's senior partner and consumer spending expert Michael J. Silverstein.

Chalk one up for upbeat housing reports.

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Broderick Perkins

A journalist for more than 35-years, Broderick Perkins parlayed an old-school, daily newspaper career into a digital news service - Silicon Valley, CA-based DeadlineNews.Com. DeadlineNews.Com offers editorial consulting services and editorial content covering real estate, personal finance and consumer news. You can find DeadlineNews.Com on LinkedIn, Facebook, Twitter  and Google+

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