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April 7th, 2010

Is Your Home A Burden Or An Investment?

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How Do You Feel About Your Home?

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How do you currently feel about your home? Is it a financial burden, or do you still consider it an investment? The ironic thing about these questions may be that nearly everyone who eventually decides to buy a home does so thinking that they’re making an investment in their future.

But how do you feel now? Is your home underwater? Can you still afford your mortgage payment? Can you keep up with the maintenance that your property needs? Do you still like your neighborhood? Are you happy?

A recent survey conducted by Fannie Mae — which “provides [a] comprehensive look at sentiment toward housing” — seemed to conclude that most Americans still want to own and invest in homes.

Here are some key findings from the survey that reveal Americans’ thoughts on homeownership:

  • Seven out of ten respondents (70 percent) said they believe buying a home continues to be one of the safest investments available.
  • Nearly two-thirds of respondents (64 percent) think it is a good time to buy a house, and nearly one in three (31 percent) think now is a very good time to buy a house. This is nearly as many who said it was a good time to buy in 2003 (66 percent), well before home prices peaked.
  • Nearly seven in ten renters (67 percent) plan to buy a home at some point in the future.
  • The majority (76 percent) expressed some degree of confidence that they would receive the information they need to choose the right loan if they bought or refinanced a home today, although only 47 percent said they are “very confident.”

Judging by this survey alone, American borrowers still want to own homes, they seem confident that they can understand their loan terms and they  believe that buying continues to be a safe investment.

However, not everyone feels the same. The effects of the housing crisis (e.g. foreclosures, negative equity, etc.) have created financial burdens for many. A growing number of borrowers have decided to deal with these types of “burdens” by simply walking away from their mortgages.

The majority of borrowers who decide to walk away from their mortgages — those who voluntarily decide to stop making mortgage payments — do so because their home is underwater (they owe more on their mortgage than their home is worth). While some say that the decision to walk away is made based on a logical, financial calculation, others feel as though borrowers have a moral obligation to pay down their debt.

Walking away — otherwise known as strategically defaulting — is a relatively new phenomenon that became much more widespread during the most-recent housing crisis. But what is it about the current housing downturn that has caused this problem to grow rapidly? Many are concerned that one reason is because the mindset of the American homeowner has changed:

“People are saying, ‘It’s purely an economic decision; if I don’t get a reduction in principal, then my home is a burden, not an investment,’” [Sue Allon, CEO of Allonhill] says. “This sounds like the next phase in the American entitlement syndrome.”

How do those surveyed feel about walk aways?:

  • Nearly nine in ten Americans (88 percent), including seven in ten who are delinquent on their own mortgages, do not believe it is acceptable for people to stop making payments on an underwater mortgage, while eight percent believe it is acceptable.
  • However, when asked if financial distress makes stopping payments on an underwater mortgage acceptable, 15 percent of respondents said yes, or nearly double the eight percent who believe it is acceptable generally.
  • Both delinquent mortgage borrowers and those current on their mortgage payments are more than twice as likely to have seriously considered stopping their payments if they know someone who has already defaulted.

The fact that both current and delinquent borrowers are more than twice as likely to “seriously consider” strategically defaulting if they know someone who has, is monumental proof that, despite a majority feeling that homes are a great investment, a large sector still views their homes, or at least did, as a burden.

Could this devastating downturn in housing have a silver lining? According to the survey, it appears as though it does:

“Consumers are still committed to owning a home, but are showing increased cautiousness, regardless of whether they rent, own their homes outright or have a mortgage,” said Doug Duncan, Vice President and Chief Economist, Fannie Mae. “They are rebalancing their attitudes toward housing and homeownership by adopting a more realistic, long-term approach, and are less willing to take risks. This focus on sustainable housing is better for the economy, better for the housing market and better for America’s families.”

Leave us a comment: is your home a burden or an investment? (Don’t forget to vote in our poll.)

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5 Responses to “Is Your Home A Burden Or An Investment?”

  1. Home Buying and Home Selling Tips » Blog Archive » Is Your Home A Burden Or An Investment? Says: April 8th, 2010 at 12:43 am

    [...] Full story is available on HSH Associates Financial News Blog [...]

  2. uberVU - social comments Says: April 8th, 2010 at 11:08 am

    Social comments and analytics for this post…

    This post was mentioned on Twitter by rssMortgageInfo: BuyHse> http://j.mp/c1b6Vy Is Your Home A Burden Or An Investment?…

  3. Mitch Says: April 8th, 2010 at 11:31 am

    Overall, I like where I live. But I have to admit that there are lots of things that need to be fixed that take a lot of time and money, neither of which my wife or I have a lot of these days. Also, home prices haven’t exactly skyrocketed, so it’s a lousy investment. But I do need a place to live, like most people, and it’s preferable to an apartment.

  4. Tim Manni Says: April 8th, 2010 at 11:45 am

    Thanks Mitch.

    So far that’s what the majority have said on our poll: 38% say “Not a burden or an investment, I need to live somewhere.”

    Thanks for commenting, hope you voted on the poll,
    Tim

  5. Mitch_M (Mitch Mitchell) Says: April 8th, 2010 at 3:04 pm

    RT @HSHassociates: New Poll on the blog: Do u view ur home as a burden or investment? http://bit.ly/cqr7XW

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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