Far fewer people today feel home ownership is a safe investment
Despite turbulence in the housing market during the past three years, most people still think homeownership is important and preferable to renting, but many remain skeptical that home prices will rebound soon, according to a survey by Fannie Mae to be released Tuesday.
The survey is Fannie Mae’s first attempt to gauge how the foreclosure crisis has affected public attitudes about homeownership. The crisis was unprecedented in many aspects, including the widespread decline in home values and the prevalence of risky subprime loans, company officials said.
With some homeowners feeling burned by the housing crisis, the survey found that many people are less likely to take risks related to buying a home.
“We have been through a serious dislocation of the housing market,” said Mike Williams, Fannie Mae’s chief executive. “What we’re trying to determine is what are the effects for consumers.”
Among the major shifts the survey found is that the public is less likely to view a home as a safe investment. In 2003, 83 percent of those interviewed in a similar study by Fannie Mae said real estate was a safe investment, compared with about 70 percent in the most recent survey.
“That is one of the big changes we have seen in attitudes. We need to figure out whether this is a sustainable shift,” said Doug Duncan, Fannie Mae’s vice president and chief economist.
The survey was conducted this winter on Fannie’s behalf by research firms Oliver Wyman and Penn Schoen Berland and included interviews with more than 3,000 people, most of them homeowners.
About 48 percent of those surveyed said that banks should foreclose on people who are unable to pay their mortgages. A softer attitude was reflected if the homeowners in trouble owed more than their home was worth, a situation known as being underwater. But most of those surveyed, 53 percent, blamed homeowners, not mortgage lenders, for taking out loans they could not afford, the survey shows.
However, lenders should bear a significant portion of the blame for the housing crisis, according to the Center for Responsible Lending. The group has compiled data showing that most homeowners with subprime loans could have qualified for more traditional mortgages but were steered toward riskier and more expensive products by brokers who got paid more to do so.
“It’s the job of lenders to assess whether a borrower can afford the loan, and while people may make mistakes in assessing their ability to afford a loan, the responsibility and knowledge lay with the lender,” said Julia Gordon, a senior policy council at the center. “Lenders make loans every day. Lenders know how to underwrite a loan. People buy a house only a couple of times in their life.”
More than a third of homeowners surveyed said they were concerned about their ability to pay all of their debts, and most thought they had not saved enough money. A quarter of homeowners surveyed listed other debts, including utility bills and car loans, as priorities over paying mortgages. That challenges the conventional wisdom that says homeowners will skip a credit card or car payment before becoming delinquent on a mortgage, Duncan said.
The survey also tried to measure public attitudes about the growing number of underwater homeowners, whose higher risk for foreclosure has worried the banking industry. Most people do not think it is acceptable for borrowers to walk away from a home simply because they are underwater.
But respondents’ views softened if the homeowner was facing a financial hardship, the survey shows. About 15 percent of respondents said it is acceptable for underwater owners to walk away from their home if they are in financial distress, compared with 8 percent in general. Borrowers delinquent on their mortgage are the most likely to be sympathetic to underwater borrowers walking away from their home.
“Why so little sympathy for their struggling neighbor, who may have lost a job and be faced with the gut-wrenching reality that they can no longer afford their mortgage?” said Brent T. White, a University of Arizona law school professor who has studied underwater borrowers. “The double standard could not be clearer: When corporations walk away from a bad investment, it is called a good business decision. But when homeowners do the same thing, they are seen as immoral.”