What is the greatest worry for today's buyers?
- Interest rates will rise. (41%, 104 Votes)
- Prices will inflate beyond reach. (32%, 81 Votes)
- Their offer will not be accepted. (27%, 67 Votes)
Total Voters: 252
Results for Trulia’s American Dream Survey are in — while wounded, the dream lives on!
To gauge the current health of the big dream, the survey examines:
- prospective buyers’ greatest worries about the present market;
- the measures prospective buyers are willing to take to close; and
- the degree to which homeownership is perceived to be a “good long-term investment.”
The fear of rising mortgage rates is at the top of the worry list for today’s buyers. Of those surveyed, 41% said they were worried mortgage rates would rise to prohibitive levels before they were able to buy. 37% were concerned prices would rise before they had the means to make an offer.
In spite of the many worries weighing on prospective buyers’ minds, they are still willing to take drastic measures to make sure they close. 25% of respondents said they would bid 1-5% higher than the seller’s asking price. Another 25% said they would offer to pay the seller’s closing costs in order to seal the deal. Sounds an awful lot like a seller’s market to us!
On the whole, however, the American Dream of homeownership has suffered a blow. 67% of Americans still include homeownership as part of their personal American Dream — down from 72% just seven months prior. However, as reports of the housing recovery flood the media, the perception of homeownership as a good long-term investment has improved from 47% to 60% over the past two years.
first tuesday insight
As we examine these perceptual trends, one word comes to mind: momentum.
The most reasonable response found in this survey is the fear of rising mortgage rates. We know this fear is founded since interest rates are already increasing. The average 30-year fixed rate mortgage (FRM) has jumped from 3.51% to 4.35% over the last year.
As we’ve long said, rising rates are inevitable in the wake of the zero-bounded interest rates of the Lesser Depression. We are in the midst of an exceptional period in California real estate history where both interest rates and prices are rising simultaneously.
We know why this is, of course. It’s due to the fact that the present asset price inflation is not coming from purchase-assist funds borrowed by end-users of real estate, but rather it’s the result of big cash from big “investors” (call them speculators if you like).
The lamentable lesson in all this: regular folks get mixed up in the momentum mess, taking desperate measures to compete in a market that wasn’t built for them, all to achieve the numinous and ever-elusive American Dream.
Re: “Trulia American Dream Survey Summer 2013” from Trulia