Interestingly enough, in a recent survey, Thomas Reuters and the University of Michigan indicates that it is sellers who are holding the market at low levels. In the survey results, approximately 75 percent of homeowners who participated in the survey viewed current home buying conditions as favorable because of attractive home prices and low interest rates. However, nine out of ten of those home owners viewed the conditions for the sale of their own home as unfavorable, not because of lack of buyers, but because of price declines.
Reuters goes on to suggest that these responses are predicting a long-term drag on the housing market for both economic and psychological reasons. There is, the report said, a significant barrier to purchasing a new home if the potential buyer's current home is "under water". Even homeowners with equity will be constrained in providing a down payment for a new property if their equity has fallen below 20 percent.
Homeowners do see some signs of improvement in the market, however. 46 percent of survey respondents felt that their home had lost value in the last year, but in the survey conducted during the fourth quarter of 2009, 53 percent of respondents reported a decline and one year ago the figure was 60 percent. 14 percent felt that their home's value had increased during the past year. The number of homeowners who expected the home to gain value over both the short and long term also increased.
The number of homeowners who expected the home to gain value over both the short and long term also increased. 24 percent expected that the value would go up over the next year while 15 percent, the lowest response since early 2007, expected a further decline. This is a significant improvement over the attitude one year ago when 26 percent of respondents expected a loss in value at a mean average of -1.9 percent. Respondents to the most recent survey, however, aren't looking for much of an increase in values; the average expected increase was 0.0 percent
It was very interesting for me to see this survey of homeowners but I ask you this....and I know Thomas Reuters is the world's leading source on intelligent information BUT doesn't this study really suggest that if sellers had equity they would sell??? There has also been much debate on what inventory will be coming on the market in the future. To reduce the cost of maintaining the condition of foreclosed properties, banks have delayed the liquidation process and allowed delinquent borrowers to remain in their homes. In addition to that, by delaying the liquidation of foreclosed properties, banks have avoided large asset value write-downs. I expect banks to continue to utilize this strategy, but it won't last forever. Once the housing market starts to pick up recovery momentum, banks will begin to slowly liquidate their inventory of foreclosed properties. Hopefully they will do so in a manner that does not greatly disrupt local supply/demand.
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