Majority still see housing as a good investment – survey

by Duffie Osental28 May 2019

Most Americans still see housing as a good investment even as they expect slower growth in home prices, according to a survey conducted by the Federal Reserve Bank of New York.

Data from the Survey of Consumer Expectations (SCE) revealed that attitudes toward housing as a financial investment remained strongly positive, with 65% of all respondents regarding the buying of property in their zip code as a “very good” or “somewhat good” investment – roughly the same level as last year.  The survey also found that only 9% of respondents regard housing as a “bad” investment, down from 10.6% a year ago.

Most Americans, however, don’t expect home prices to grow in the near- or mid-term. According to the survey, average home price change expectations at both the one- and five-year horizons fell relative to last year. One-year-ahead growth expectations in home prices in 2019 was 3.6% –a percentage point below last year’s 4.6% and the second-lowest level since the inception of the survey in 2014. Five-year growth expectations averaged 2% per year, almost a full percentage point lower than last year.

The survey also found that expectations of future mortgage rate increases rose about 50 basis points at both the one- and three-year horizons, with older respondents assigning a higher likelihood to a mortgage rate increase than younger respondents.

“The tight mortgage credit conditions of the last decade have produced a group of homeowners who are at comparatively low risk of default, so changes in the homeownership rate will likely be determined primarily by rates of entry into homeownership,” the Fed said in a statement. “Barring a change in the economy, the nation’s aging population will likely push up homeownership since older households are historically much more likely to own.”