- The Washington Times - Thursday, July 22, 2010

Stagnant and plummeting home values and sad stories of distressed homeowners have created a more cautious approach to homeownership, yet there still remains a positive attitude about the emotional and financial benefits of buying a home, according to several recent national surveys measuring consumer attitudes about housing issues.

The surveys reveal that while renters are not necessarily planning to purchase a home in 2010, there still is a general sense that buying a home is a valuable long-term investment.

The Fannie Mae National Housing Survey, conducted in December 2009 and January 2010, polled 908 renters and 2,543 homeowners and discovered that 65 percent prefer owning to renting.

“Overall, we are seeing a rebalancing of attitudes about homeownership versus renting,” says Steve Deggendorf, director of strategic planning for Fannie Mae. “While there is a surprisingly strong positive attitude toward homeownership even among underwater borrowers [those who owe more on their mortgage than their home is worth] and distressed owners, it is clear that nonfinancial reasons to own have eclipsed financial reasons.”

The National Apartment Association’s (NAA) survey, conducted in May with 1,443 homeowners and 617 renters, found that 76 percent of respondents deemed renting to be a more favorable option in the current real estate market than owning a home. This figure represents an increase of 5 percent compared to responses in a 2008 survey.

“Our survey showed that the main reason people prefer to rent is to avoid responsibility for major repairs or maintenance,” says Paul Bergeron, director of communications for NAA. “People also cited financial reasons such as not being impacted by an unpredictable real estate market and not being susceptible to foreclosure. Renters have a big advantage in this economy because they have flexibility to move if they need to in this job market. They can end their lease or take a short-term lease and not have the stress of selling a home.”

The NAA survey showed that 60 percent of renters intend to continue renting for at least the next year. Twelve percent plan to buy a home this year.

The Fannie Mae survey showed renters often still want to own a home but are concerned about affordability and financial uncertainty.

“In the current economy, renters are more likely to rent again, at least for the short-term,” Mr. Deggendorf says. “We are in a dynamic period and we recognize that attitudes translate into behavior, so we will continuously look at trends in future surveys, particularly to see if consumers demonstrate a preference for homeownership or renting. In the current survey, even people who are underwater and those who are delinquent in their payments expressed a preference for owning a home.”

The Fannie Mae survey asked respondents whether “owning makes more sense because you’re protected against rent increases and owning is a good investment over the long term.” Seventy-five percent of renters agreed with that statement, while 20 percent agreed that “renting makes more sense because it protects you against house price declines and is actually a better deal than owning.”

Locally, Realtor Karen Hall of Century 21 New Millennium in Alexandria, Va., says a “feeding frenzy” is taking place in the Washington real estate market.

“Everyone seems to be trying to buy now in order to take advantage of low interest rates and relatively lower prices,” Ms. Hall says. “The expectation is that prices have stabilized or are starting to increase again. Buyers are motivated because they have a general sense that prices are good, especially compared to 2004 to 2006.”

Ms. Hall says low interest rates are encouraging some buyers to look at homes in a higher price range than they anticipated.

“When they realize that the monthly payment for a $500,000 home is the same as the monthly payment would have been a few years ago for a $350,000 home, buyers are often motivated to bump up their price point a little,” she says.

Ms. Hall says the buyers she works with are interested in owning for the pride of homeownership and because they like the idea of paying down the mortgage rather than paying rent to someone else. In some cases, they have found that owning a home costs the same or even less each month than renting.

Century 21 Real Estate conducted a survey of 708 first-time homebuyers and sellers earlier in 2010 that revealed first-time buyers were motivated most by current home prices (66 percent), followed by the homebuyer tax credit (63 percent) and low interest rates (60 percent).

The Fannie Mae survey showed the No. 1 reason for consumers to buy a home was because “it means having a good place to raise children and provide them with a good education,” followed by “you have a physical structure where you and your family feel safe” and, third, “it gives you control over what you do with your living space, like renovations and updates.”

“The survey results demonstrate that the nesting instinct is in place,” Mr. Deggendorf says. “Financial reasons for homeownership dropped down below the nonfinancial reasons to buy in every category of consumers we surveyed.”

The strongest financial reason for buying a home in the survey results, coming in at No. 4, was, “Paying rent is not a good investment,” followed by “Owning a home is a good way to build up wealth that can be passed along to my family.”

“The buyers we talk to are interested in owning as a long-term investment, as a place to raise a family,” says Diann Patton, a consumer real estate specialist with Coldwell Banker Real Estate based in Northern California. “We don’t see ‘flippers’ now. It is almost as if we have reverted to our parents’ era, when people bought a home and stayed there.”

Ms. Patton says that in a survey of 1,050 single homeowners by Coldwell Banker Real Estate, buyers said they were focused on the affordability of their purchase.

“I think people have a different attitude about buying now and are determined to stay within their comfort level in terms of their budget,” Ms. Patton says. “When we asked buyers if they paid as much for their home as they could qualify for, 68 percent said no, that they purchased less than the amount of the mortgage they could borrow.”

More than half (53 percent) of single homeowners in the Coldwell Banker survey reported they purchased a home because it was more cost-effective than renting in their area.

“I think right now that there are strong financial reasons encouraging people to buy a home,” Ms. Patton says. “People are enticed by low interest rates and low prices. When they look at a home that cost $400,000 a few years ago and they can buy it now for $200,000, they want to take advantage of market conditions. Consumers will buy homes for emotional reasons whether the market is good or not, but when mortgage rates are this low and prices are more affordable, they have more confidence to buy.”

Interestingly, in spite of price drops and foreclosures, 70 percent of the consumers surveyed by Fannie Mae still consider buying a home one of the safest investments available.

“We asked that same question in 2003, and in the 2009/2010 survey ‘buying a home’ dropped from first place to second place,” Mr. Deggendorf says. “But we were surprised that the number of people agreeing that buying a home is a safe investment dropped only from 83 percent to 70 percent. We thought it would drop more. Even among delinquent homeowners, 65 percent believe owning a home is a safe investment.”

The only investment respondents considered safer than owning a home was putting money into a savings or money-market account.

The three main reasons renters have not bought a home, according to the Fannie Mae survey, are concern about not having good enough credit, worry about whether they can afford the purchase or upkeep of a home, and believing that it is not a good time economically to buy a home.

While for some consumers the American dream of owning a home has been a frustrating experience, these survey results seem to indicate that, at least in the long-term, the dream will endure.

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