What Housing Slump? Majority of Americans Optimistic About Future of Home Values

Despite a housing market slimp that doesn’t appear to be picking up any time soon, owners are confident that their properties will appreciate in the future.

According to the Second Annual RBC Capital Markets Consumer Survey, nearly half of all homeowners still expect at least 5 percent annual increases in their home values over the next few years, which is down from almost 60 percent of homeowners sharing such a belief last year.

Still, it’s a high figure given the climate.

The national survey of 1,003 Americans also revealed that 25 percent of homeowners have already paid off their mortgage - twice the number of people with bad credit mortgages such as risky variable and interest-only home loans.

“While it’s true that it may be easier to pay off a mortgage in Selinsgrove, Pennsylvania than it is in NYC, we were still very surprised that the number was so high,” said Scot Ciccarelli, managing director and equity research analysts for RBC Capital Markets. “This goes against the general belief that most Americans are leveraged to the hilt.”

More mortgage survey results: More than 80 percent of all homeowners surveyed have at least $50,000 of equity built up in their homes; while almost 60 percent believe they have at least $100,000 of equity in their homes, underlining how much home equity has been built up in the U.S. over the last several years.

However, those who entered the end of the housing cycle with variable rate and interest-only mortgages are clearly at risk once their mortgages renew.

Close to 40 percent of those with variable rate and interest-only mortgages are concerned with their ability to meet higher payments, while 13 percent haven’t even considered the ramifications. While this is a fairly small segment of the overall survey (approximately 6 percent), it suggests significant risk to this segment of the population.

“While real estate expectations are lower than they were last year, consumers still seem optimistic despite what we are seeing in the marketplace,” said Ciccarelli. “Declining real estate values could eventually impact consumer spending as people don’t feel as wealthy as they used to and become less likely to borrow against the equity they have built up in their homes.”

Ciccarelli also noted that while people have built up substantial home equity over the years, he is very concerned about those people with variable and interest-only mortgages.

“Many of them seem ill equipped to handle the higher payments they will eventually incur.”

As a result, mortgage refinancing activity is likely to rise because these borrowers will wish to lock in a low rate.