Survey: Most Consumers Don’t See a Housing Bottom in 2011

With mortgage rates as low as they are, many analysts are wondering why the housing market is still sluggish. I previously shared my view that would-be home buyers are simply waiting for prices to stop falling. But I didn’t have any hard evidence to support that assumption. So we ran a survey and asked our readers this very question: Do you think your housing market will hit bottom in 2011? More than 1,700 of them were nice enough to respond. Here’s what they told us.

Survey: Housing Market 2011

Survey Details

We ran this survey on the Home Buying Institute website from April 1 – May 15, 2011. We offered a free home-buying booklet (PDF download) as an incentive, to increase participation. We asked the following question:

Do you think home prices in your area will hit bottom in 2011?

Survey participants had three responses to choose from:

  1. Yes, they will hit bottom in 2011.
  2. No, they will keep falling through 2011.
  3. Prices will start going up this year.

More than 1,700 people responded to our survey, and 78 percent of them felt that home prices would keep falling. Only 4 percent of respondents felt that prices would rise (or continue rising) in 2011. This was a nationwide survey, with participants from almost every state in the U.S.

Consumers Don’t Expect a Bottom Until 2012, at the Earliest

Interestingly, the views of consumers seem to coincide with the largely pessimistic views held by most economists. In March, housing-research firm MacroMarkets released the results of a home-price survey. The survey was sent to more than 100 housing analysts and economists. The general consensus was that the current housing market is still deteriorating. Most of the experts surveyed did not expect the housing market to hit bottom until 2012 or later.

Consumer sentiment is tracking right along with the experts. Most consumers expect home prices to continue falling through 2011. And who can blame them. A recent report by Zillow showed that home prices nationwide had dropped by 3 percent over the last quarter. Ouch. That kind of news doesn’t inspire confidence in buyers who are already nervous about the market. Their fears are legitimate. Who wants to plop down a small fortune on a house only to see the value drop further?

Housing starts are down, as well. (Housing starts are the number of new homes that started construction during a certain period.) They dropped by 10.6 percent from March to April 2011, which signals a major slowdown in the building industry — not to mention a lack of demand.

Low Mortgage Rates Aren’t Enough

My question is, why do so many in the media talk about mortgage rates as the saving grace of the housing market? Mortgage rates alone are not enough to spur the housing market. We’ve been seeing this for months now.

Rates are very low right now, and they’ve dropped for four weeks in a row. The 30-year fixed-rate mortgage had an average rate of 4.6 percent for the week ending on May 13, 2011. Let’s put this in perspective. The average rate during the Carter administration was nearly 20 percent. Now they’re hovering below 5 percent.

Mortgage rates don’t get much lower than they are right now. Even at the lowest point of the last two years, the average rate for a 30-year fixed mortgage was only half a percent lower than it is right now.

As far as mortgage rates go, this is about as good as it gets.

But home buyers are still hesitant. It’s not the mortgage rates causing this hesitancy — it’s home prices. Specifically, it’s the threat of continued price erosion that is making buyers so reluctant right now. The media has rolled out the “double dip” phrase again, and it scares the bejesus out of would-be home buyers.

Additional Survey: No Housing Recovery Until 2014?

File it under ‘C’ for coincidence. Shortly after publishing this survey, I noticed that Trulia and RealtyTrac published a similar one. Bloomberg ran the story earlier today. It actually serves as a perfect follow-up to the question we asked in our survey: If you don’t think the housing market is going to recover in 2011, when do you think it will happen?

According to the Trulia / RealtyTrac poll, more than half of U.S. homeowners and renters don’t expect the housing market to recover until 2014, at the earliest.

A Mini-Surge in Refinancing

Given the lack of housing demand, mortgage lenders are thankful for a small surge in refinancing activity. Last week, refinancing applications reached their highest rate since December of 2010. Homeowners are rushing to lock down a low rate, and they’re smart for doing so. Industry analysts don’t expect rates to get much lower than they are now.