November 2011
Those who know someone who has defaulted on a mortgage are more likely to have a pessimistic outlook on the economy, according to Fannie Mae’s third quarter National Housing Survey. However, knowing a defaulter does not seem to cloud their view of homeownership.
Ninety-two percent of owners who know someone who defaulted on a mortgage and 89 percent of owners who do not know a defaulter agree that owning a home makes more sense than renting. The rate of owners who believe buying a home is a safe investment is only a few percentage points higher for those who do not know a defaulter as those who do know a defaulter. Sixty-seven percent of owners who know a defaulter and 70 percent of those who do not now a defaulter believe a home is a safe investment. When the same question was posed to renters, 52 percent of both groups responded that a home is a safe investment. However, when considering the state of the economy, those who know a defaulter are more likely to have a negative outlook. For example, 80 percent of owners who know a defaulter believe the economy is on the wrong track, whereas 74 percent of owners who do not know a defaulter share this view. Among renters, 74 percent of those who know a defaulter believe the economy is on the wrong track, and 70 percent of those who do not know a defaulter believe the economy is on the wrong track. Nine percent of homeowners who know a defaulter say they are stressed about their ability to make debt payments, while 4 percent of owners who do not know a defaulter worry about their ability to make payments. Among all survey respondents, 36 percent expect their financial status to improve in the next year. Also, despite the fact that 77 percent of respondents are unlikely to buy a home in the next 12 months, 68 percent believe now is a good time to buy a home. “At the macro level, we see that economic activity picked up in the third quarter, thanks to a sizable rebound in consumer spending on services. However, the hike appears to have come out of consumers’ savings, as disposable income fell during the quarter,” said Doug Duncan, vice president and chief economist at Fannie Mae. “The improvement in consumer spending has not spilled over into big-ticket items such as housing, as consumers’ concerns over their finances and dissatisfaction about the direction of the economy remains elevated,” Douncan continued.
