Investing

Americans Should Be Nervous About The Housing Market

Americans think that housing prices in 2011 will remain stable though they increasingly consider real estate to be a bad investment.

That’s the not-too-surprising findings of a study released today by Fannie Mae. On the one hand, 78%  respondents believe said they expected housing prices will hold steady or increase over the next twelve months, up from 73% in January 2010.   Meanwhile, 64% of Americans said they considered buying a home to be a good investment, down from 70%.

These two sentiments are not contradictory.

Many experts including Warren Buffett and the National Association of Home Builders believe that the housing market will rebound this year. Signs of improvement abound.  Sales of foreclosed homes fell in 2010, according to RealtyTrac. Existing home sale rose in January for the third straight month.  Fewer people who are seriously delinquent are seriously considering defaulting, Fannie Mae says.   Housing has never been this affordable in decades.

“Pricing is down so much in some markets that when you analyze renting versus owning it makes much more sense to own,” says Michael Larson, a real estate analyst at Weiss Research in Jupiter, Fla., in an interview with the Wall Street Journal.

Nonetheless, its premature to start popping champagne corks.

For one thing, as  Moody’s Analytics points out, the pace of sales is moving at a glacial rate.  The median house price dropped 3.7% year-over-year, according to the latest data.   They are down about 29% from their 2006 peaks  High unemployment also continues to act as a drag on housing as is weak consumer confidence.

It’s little wonder that those surveyed by Fannie Mae are pessimistic about the strength of the economic recovery.   There is plenty to remain nervous about.

Survey Methodology: From October 15, 2010 to December 20, 2010, 3,407 telephone interviews were conducted with Americans aged 18 and older.