32% of Homeowners Expect Home Prices to Drop Next Year, Highest Short-Term Pessimism Ever; Recognition Phase Underway
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Rasmussen Reports recently released an interesting survey that shows Homeowners Are More Pessimistic Than Ever About the Short-Term Housing Market
A new Rasmussen Reports survey finds that 32% expect the value of their home to decrease over the next year, the highest finding since Rasmussen Reports began asking the question regularly in December 2008.Recognition Phase
Just 21% believe the value of their home will go up over the next year.
Looking longer term, people are feeling a bit better. Fifty-two percent (52%) of homeowners say the value of their home will increase over the next five years, the highest level of optimism measured since May.
For the second month in a row, only 55% of homeowners say their home is worth more than their mortgage. A third (33%), however, report that the mortgage is bigger than the home value.
Over half of Americans know someone who has lost their home because they could not pay their mortgage, but just 20% believe that when banks foreclose on a home, it's generally due to unfair lending practices.
Some will look at the survey results and see a contrarian indicator. I rather doubt it. I do not think we bottom until homeowners sour on long-term optimism.
Given current conditions, housing inventory, shadow inventory, another jobless "recovery", and changing social attitudes from younger generations, home prices will likely stay depressed for a while.
So instead of the survey being a contrarian indicator, I view these attitudes as part of the recognition phase. Consumers are starting to realize the economic headwinds and what that will do to housing prices in the short-term, even if they have not yet figured out the long-term demographic mess.
Time and Price is the Only Legitimate Cure
The most encouraging sign in the report is that "a majority of Americans continue to oppose any government intervention in the housing market."
The only legitimate cure for what ails housing is price and time. Prices need to fall to the point there is genuine demand. When that happens, the bottom will be in, although appreciation off that bottom will be quite slow.
In the meantime, the Fed's misguided attempt to prop up prices, in conjunction with all the interference by Congress, just stretches out the bottoming timeline.
Mike "Mish" Shedlock
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