Fannie Mae's latest quarterly National Housing Survey (NHS) has found consumer pessimism growing, as most Americans are concerned about job loss, with 64 percent of Americans surveyed during the second quarter saying the economy is on the wrong track, the most for any quarter since the inception of the survey in the first quarter of 2010. That pessimism continued to mount in July, with Fannie Mae's monthly survey finding that 70 percent now believe the economy is on the wrong track, and just 23 percent say the economy is heading in the right direction.
"Consumers are more cautious due to concerns over employment and household finances," said Doug Duncan, vice president and chief economist of Fannie Mae. "As a result, consumer spending, which accounts for about 70 percent of the economy, ground to a halt in the second quarter. Consumers are more hesitant to take on additional financial commitments, and a setback to confidence means a setback to the recovery of the housing market."
The Fannie Mae Second-Quarter 2011 National Housing Survey polls homeowners and renters to assess their attitudes toward owning and renting a home, confidence in homeownership as an investment, the current state of their household finances, views on the U.S. housing finance system, and overall confidence in the economy.
The National Housing Survey (NHS) found that 26 percent of American workers report being concerned about losing their job in the next 12 months. While 44 percent of concerned American workers report having a home mortgage (compared to 42 percent of all Americans), just 33 percent of them perceive their savings to be sufficient (versus 49 percent of those workers not concerned about losing their job). Forty-four percent of these workers say their household expenses have increased significantly over the past year, compared to 35 percent of workers not concerned about losing their job. Employed Americans concerned about job loss are more likely than all employed Americans to say it is a bad time to buy a home and they are more likely to say they would rent their next home.
More than 50 percent of renters report living in single-family homes. Despite just 23 percent of single-family renters saying that renting makes more sense than buying a home, 53 percent say they would continue renting if they were going to move. Seventy-three percent of single-family renters say it would be difficult for them to get a home mortgage, with 33 percent citing their credit history as the biggest obstacle to getting a home mortgage (versus 20 percent of multifamily renters). Compared to multifamily renters, single-family renters are younger and more likely to have children.
Thirty-one percent of minority mortgage borrowers report being underwater compared to 23 percent of non-minority mortgage borrowers. Thirty-five percent of minority borrowers say they are making a great deal of financial sacrifice to own, compared to 20 percent of non-minority borrowers. Minority borrowers are more likely than non-minority mortgage holders to live in states with above-average levels of negative equity and are more likely to report lower family household incomes (44 percent say their family income in 2010 did not exceed $50,000, compared to 23 percent of non-minority borrowers).
"Survey data make clear the relationship between home purchase demand and concerns about the stability of employment," said Duncan. "Dissatisfaction about the direction of the economy and related employment fears are damping demand to buy homes and slowing the recovery. People who believe owning is a better deal than renting are nonetheless planning to rent, at least until things improve it would seem."
Other highlights of the NHS include:
►Consistent with previous findings, most Americans think it would be difficult for them to get a home mortgage today (53 percent) and increases to 71 percent among renters.
►While 51 percent of Generation X Americans (age 35-44) say it would be difficult for them to get a home mortgage today, the number increases to 59 percent among Generation Y (age 18-34).
►Thirty-five percent of Pre-Baby Boomers (age 65 and older) say they know someone in their area or neighborhood who has defaulted versus 42 percent for Generation Y and 49 percent for Generation X Americans.
►Twenty-six percent of mortgage borrowers say they are underwater, compared with 23 percent in Q1.
►Underwater borrowers remain more likely to be stressed about their debt than all mortgage borrowers—42 percent of underwater borrowers say they are stressed about their debt, compared to 31 percent of all mortgage borrowers.
►Underwater borrowers are more likely to know someone who has defaulted on their mortgage—57 percent of underwater borrowers versus 49 percent of all mortgage borrowers and 43 percent of the general population.
►As in previous quarters, 75 percent of respondents support loan modifications, believing such programs help protect the economy and local communities from increased foreclosures and falling home prices.
►In line with previous quarters, 57 percent of Generation Y Americans (age 18-34) expect their personal situation to improve over the next year, compared to only 42 percent among Generation X (age 35-44) and 35 percent among Baby Boomers (age 45-64).