Builders See More Small Signs of Slowly Emerging Recovery

       Builders who have been watching for signs of a housing recovery received one more small piece of encouraging news last week from the Chicago Booth/Kellogg School Financial Trust Index, which found a significant rise in optimism on the housing front among the more than 1,000 U.S. households it surveyed by telephone during two weeks in late June.

       The quarterly index reported on July 13 that the percentage of people who think house prices in their area will decrease in the next year dropped to 26% last month, from 37% in March and 47% in December 2008.

       “In only six months we’ve seen marked improvement in confidence toward home values,” said the report’s co-author, Paola Sapienza, of the Kellogg School of Management at Northwestern University.

       “In fact,” he noted, “75% of the people who changed their opinion during this time period now think housing prices will remain stable, while the remaining fourth think house prices will rise.”

       The index was created at the end of last year by Sapienza and Luigi Zingales, of the University of Chicago Booth School of Business, to track the public’s trust in America’s financial institutions. The researchers said they found a sense of optimism and less fear and anger in the latest survey, with growing trust in banks and government intervention in the financial markets.

       Still, the index indicated that there is a long way to go in regaining the public trust, moving from 19% at the end of last year to 21% in late June.

       The one negative uncovered in the analysis was related to the prospect of losing a job, an issue that continues to have a negative impact on the housing market. The researchers reported that respondents who think there is a chance they will lose their job during the next 12 months rose from 24% in December 2008 to 26% in last month’s survey.

       The Financial Trust Index findings were mirrored in the latest 2009 National Housing Pulse Survey, which was released by the National Association of Realtors® on July 9.

Downpayment and Closing Costs the Biggest Obstacle

       The Realtors® survey, which measures how affordable housing issues affect consumers, found that most Americans consider having enough money for downpayment and closing costs to be the biggest obstacle to buying a home.

       The survey also found concerns over job security reaching their highest level since the research was started in 2002. Two thirds of those participating in the most recent telephone survey identified job layoffs and unemployment as a big problem, and eight in 10 pointed to the job situation as a barrier to homeownership.

       The survey was conducted in the nation’s 25 most populous metropolitan statistical areas.

On other questions, the results of the survey were positive:

• Despite the challenges with the economy and housing market, 83% said they still believe buying a home is a good financial decision.
• Three-fourths of those surveyed also believe now is a good time to buy a home, a number that has increased steadily over the past two years.
• One-third of renters said they are thinking more about buying a home than they were a year ago.
• More than three-fourths of the households polled said they were concerned about the drop in home values, but nearly seven in 10 expect local home prices to remain about the same in the next three months. Only 18% expect prices to decrease further.

       Just over half (51%) of the respondents in the Realtors® study said foreclosures were a problem in their area. And although 92% said that neither they nor members of their immediate family had experienced a foreclosure in the past year, one in five said they were worried that they would have difficulty in making their mortgage payments over the coming 12 months.

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