Friday, July 24, 2009

Less People Think House Prices Drop; Fear of Job Loss Looms Against Home Purchases

Excerpts from an NAHB article and an article from The Daily Herald:
Among the signs of the housing recovery, there was one more small piece of encouraging news last week from the Chicago Booth/Kellogg School Financial Trust Index, which found a significant rise in optimism on the housing front among the more than 1,000 U.S. households it surveyed by telephone during two weeks in late June.

The quarterly index reported on July 13 that the percentage of people who think house prices in their area will decrease in the next year dropped to 26% last month, from 37% in March and 47% in December 2008.

“In only six months we’ve seen marked improvement in confidence toward home values,” said the report’s co-author, Paola Sapienza, of the Kellogg School of Management at Northwestern University.

“In fact,” he noted, “75% of the people who changed their opinion during this time period now think housing prices will remain stable, while the remaining fourth think house prices will rise.”

The Financial Trust Index findings were mirrored in the latest 2009 National Housing Pulse Survey, which was released by the National Association of Realtors® on July 9. The Realtors® survey, which measures how affordable housing issues affect consumers, found that most Americans consider having enough money for downpayment and closing costs to be the biggest obstacle to buying a home.

On other questions, the results of the survey were positive:
  • Despite the challenges with the economy and housing market, 83% said they still believe buying a home is a good financial decision.

  • Three-fourths of those surveyed also believe now is a good time to buy a home, a number that has increased steadily over the past two years.

  • One-third of renters said they are thinking more about buying a home than they were a year ago.

  • More than three-fourths of the households polled said they were concerned about the drop in home values, but nearly seven in 10 expect local home prices to remain about the same in the next three months. Only 18% expect prices to decrease further.
The survey also found concerns over job security reaching their highest level since the research was started in 2002. Two thirds of those participating in the most recent telephone survey identified job layoffs and unemployment as a big problem, and eight in 10 pointed to the job situation as a barrier to homeownership.

To combat this worry, builders have been offering job loss insurance. Out in Illinois, Bigelow Homes offered Mortgage payment protection as a part of a plan to help people overcome fear that is keeping them out of the housing market.

"We understand that there are a number of reasons why people are reluctant to jump into the housing market," Bigelow said. "However, if you can overcome those fears, it's a great time to buy. After a lot of brainstorming, we figured out a way to reassure our buyers that their investment is safe." In essence, the builder eliminated the things that keep fretful buyers up at night.

"When we first announced this program this spring, it tripled our traffic," Bigelow said. "Things have leveled off since then but people continue to be interested. Between the reasonable prices, the historically low interest rates and the recession-proof protection, I can't think of anything that would make buying one of our homes a safer investment than it is now."

Closer to home here on Staten Island, the same kind of assurances are being offered by The Estates at Opal Ridge, which has been offering the plan since February. "We were on the forefront of this kind of offer," said Adrienne Setbon, the real estate broker at Opal Ridge, a family-friendly community of twenty-two homes out in Princes' Bay. "The response has been very positive. While it isn't the 'big giveaway' that closes a deal, it is something that has been giving a lot of our buyers a lot more confidence to buy at Opal Ridge, and is something that our competition doesn't offer."

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