A New Attitude: A Fannie Mae Study Says Americans No Longer
So Confident About Investing in a Home
2010-04-13
By Eric Easter

A study released by Fannie Mae this week shows that America may be in the throes of a significant shift in how they view homeownership, with an increasing number of people preferring to own a home, but making decision to own for very different reasons that during the pre-crisis housing boom.

The survey, conducted between December 2009 and February 2010 with 3000 homeowners, found that as a result of the economic crisis the public is less likely to view a home as a safe investment. In 2003, 83 percent of those interviewed in a similar study by Fannie Mae said real estate was a safe investment, compared with about 70 percent in the released survey.

Homeowners are also apparent shirting their bill priorities in ways that are the reverse of how people viewed mortgages in the past. More than a third of homeowners surveyed said they were concerned about their ability to pay all of their debts, and most thought they had not saved enough money. A quarter of homeowners surveyed listed other debts, including utility bills and car loans, as priorities over paying mortgages.

For one cultural indication of the survey results, one need only look at HGTV, the cable channel with programming that is something of a bellwether of the current mood of homeowners. Gone are the programs like “Flip this House” and in are programs on such topics as competitive landscaping – investment in the home you’re staying in for life as opposed to renovations to the home you’re selling for a quick buck.

EbonyJet.com talked with Cristina Miranda, Fannie Mae’s Director of Multicultural Communications to bring some context to the survey results.

EJ: What surprises most about the study is how different these survey results are from how people were thinking about ownership just two years ago at the height of the bubble, and then again from the postwar era when home ownership was pretty much the universal goal of Americans. Does this study suggest that owning a home is no longer a part of the American Dream?

Miranda: The American Dream is still alive. People still want to own a home in general. But they are being more cautious since we’ve been going through the economic crisis. But people are using more non-financial reasons to own a home. Instead of using it as an investment that they can profit from, people are looking for a home that works for their family, is in a safe area, and that is near better schools.

EJ: Or they’re deciding not to buy at all…

Miranda: Renters are staying where they are for a bit. Shoring up credit. Jobs are in jeopardy and they are making sure things are in order before they jump. For some people renting is a fine option. You have to remember that you’re not just buying a home but maintaining a home as well. And in some cases, renting may get you closer to those neighborhoods and schools you prefer without having to take on the cost and burden of a new mortgage payment over your head.

EJ: OK, you have a different mindset among possible homeowners, so now what from a banking perspective? Does it mean safer financial instruments? A return to the classic 30-year mortgage? Will a mortgage be easier to get now for people who are qualified?

Miranda: Fannie Mae did the study because we wanted to help ourselves understand more. Understand what people are thinking. As we work to create better financial products and initiatives, we will  take those things into consideration and hopefully make it easier on borrowers.

EJ: Then from a potential homeowner’s perspective, what are we talking about? A return back to the old school of our parents where you didn’t even consider buying a home unless you had 20-25% down in cash and A-1 credit?

Miranda: It really depends, but realistically you’re probably talking about at least a 20% down payment now. That’s what people originally did. You had strong FICO scores and 20% down going in. Hard lessons have been learned during the economic crisis. People are savvier. They’re asking if this is the best choice to make, and how will this affect me. People are going back to their roots. They see home ownership as a good long-term investment, but emphasis on long term. They will be buying homes for reasons like community and stability.  

EJ: So taking this new attitude to a logical conclusion, we could be talking about eventually people creating what they’re looking for, and neighborhoods becoming more stable and safer because people are staying put and making long term commitments to the place they live..

Miranda: The survey doesn’t ask or answer that. But honestly, I want to believe that would happen. Maybe that’s something we should look at in the next survey.