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Boardroom view.

Let's ignore for a moment those who make their living forecasting interest rates and focus instead on the man or woman on the street and where they think interest rates are going. Fannie Mae did this rather inadvertently by asking a representative sample of Americans as part of a huge consumer survey where they thought interest rates would be in a year's time. What do you think they said?

Interestingly, only 10 percent thought rates would be a lot higher in a year's time. A sizeable 63 percent thought rates would be either a little higher (37 percent) or about the same (26 percent). This strongly suggests that people who could be in the market to buy or refinance existing loans now, don't feel stampeded by rate conditions. They feel they have time to shop and don't have to jump in quickly just to catch a passing window of opportunity.

Furthermore, 33 percent altogether think mortgage rates will either be about the same or a little lower (7 percent). A rather large group shook their collective heads and said "Beats me." (Or in official survey parlance 19 percent said they were "Not sure.") The relatively large block of optimistic amateur forecasters suggests there may be a rather sizeable group of would-be homebuyers or refinancing customers who are out there waiting and expecting the next dip in rates.

This is only one very small finding from a study of American attitudes toward housing and homeownership prepared by the survey firm of Hart-Teeter Research on behalf of Fannie Mae. The findings are based on 1,521 in-person interviews done with a scientifically selected group of Americans between February 22 and March 9, 1992. Of the total individuals interviewed, 755 were men and 766 were women. The sampling of the population was done in a way to provide a representative cross section of the U.S. population. Of those interviewed, 1,002 were homeowners and 503 renters; 1,102 were whites, 200 were blacks, 161 were Hispanics and 58 people were from other racial groups. The study notes that the "Results accurately reflect the distribution of the entire population by age, race, gender, size of residence, education, occupation and other demographic factors." So, if you wanted to zero-in on a tiny group that thinks, acts and buys houses like real Americans do, this is it.

One of the major findings of the Fannie Mae National Housing Survey was that 35 percent of those interviewed believe that a lack of affordable housing is one of the two or three most serious problems facing the U.S. currently. Another 48 percent said this is a "serious problem." So, if someone were looking for a campaign issue there appears to be one here.

But on the other hand, while it may be a hard game to break into, the homeownership ladder clearly still holds strong allure for many Americans. A full 78 percent of those surveyed still view housing as a good investment - despite some of the recent depreciation that has shaved thousands off of some current homeowners' equity stakes.

Just to show how in touch homeowners are with pocketbook issues near and dear to their hearts, the study confirms that regional respondents were very aware of both recent depreciation and appreciation trends that have rolled through their markets. Condominium owners learned a tough lesson about the ceiling that limited demand in the market can put on the upside potential for price appreciation for their units - particularly when coupled with severe over-building relative to demand. This is reflected in the study, which found that only 21 percent of those who own condominiums believed their homes had appreciated greatly. This compared with the 51 percent of the owners of single-family detached homes who believed their homes had appreciated greatly. Part of this can be explained by demographics, with the baby boom generation having moved through its condominium-buying, single lifestyle days, thus notably deflating both market demand and prices for condos.

Clearly, homeowners in the East have seen market values fall for homes in their region. This stark lesson is reflected in the fact that the study found that even though 28 percent believed their homes were more valuable than one year ago, an almost equal 26 percent believed their homes were less valuable. The surveyed homeowners from the West appear to have either escaped or ignored recent depreciation trends in that region, with 42 percent of those persons saying that their homes were worth more than a year before. Seventeen percent of homeowners from the West responded that their homes had dropped in value from a year ago. In the Midwest, 32 percent of the homeowners said their homes were worth more than a year ago and 36 percent of those in the South saying their homes had gone up in value.

Appreciation expectations among black homeowners were markedly higher than for whites, the study showed. Fifty-four percent of the black homeowners surveyed said they believed their homes were more valuable than one year ago; 32 percent of whites expressed that sentiment. This likely reflects some of the price damage that has been registered in the jumbo markets where prices and demand have been depressed.

Generational disparities are also clearly evident in the Fannie Mae housing study. Sixty-three percent of those age 65 or older believe their home would sell for a price "a lot higher" than they paid for it. Only 28 percent of those age 25 to 34 expressed that sentiment. Reflecting how large a share these older, equity-rich homeowners are in the larger pool of total homeowners, a full 50 percent of those surveyed said they could sell their house for a lot more than what they paid for it.

As for pinpointing where the homebuying sentiment is currently the strongest, the opinion survey found that 56 percent of the people in the East see this as a very good or somewhat good time to buy a home. That compares with a very strong 68 percent of those surveyed in the South viewing the current market in those terms; 64 percent in the West sharing that rosy view of the current market conditions and 58 percent of those in the Midwest. Overall, 62 percent said this was either a good or somewhat good time to buy a home.

Of those saying it was a good time to buy, 59 percent said the reason was low mortgage rates; 27 percent cited lower home prices; and 13 percent said because it was a buyer's market. The primary reason cited by those saying it was a bad time to buy was the unstable economy and job insecurity (21 percent.)

The obstacles to homeownership were clearly more acute for renters. Lack of adequate down payment and closing cost funds was far and away the major problem, but job instability and credit problems were also major problems cited by these persons. A full 75 percent of renters said that lack of down payment money and closing cost funds was a major obstacle to homeownership. Sixty-two percent of renters said that their monthly income was a major barrier to a home purchase. However, even if those problems could be solved, 40 percent of renters said job security remained as a serious obstacle and 41 percent of renters said credit history problems were a major obstacle. The job instability factor was cited by only 22 percent of current homeowners as a major obstacle to homeownership.

Sixty-six percent of blacks said down payment money and closing costs were a major obstacle to homeownership compared with 47 percent of whites and 59 percent of Hispanics. Insufficient monthly income was cited as a major obstacle to buying a home by 59 percent of blacks compared with 54 percent of Hispanics and 39 percent of whites.
COPYRIGHT 1992 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:national housing survey reveals the knowledge extent of American homeowners on housing market
Author:Hewitt, Janet Reilley
Publication:Mortgage Banking
Date:Jun 1, 1992
Previous Article:Secondary market.
Next Article:A balancing act.

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