More Expect Home Values to Decline

By:
Kirk Haverkamp | September 03, 2010

U.S. consumers are taking an increasingly pessimistic view of home values, in the wake of plunging home sales and other bad news from the housing market. 

The share of homeowners who expect homes in their neighborhood to decline in value over the next year rose to 40 percent in early September, up from 31 percent in reported in August, according to the monthly RBC Consumer Outlook Index. One one-quarter of those surveyed expect prices to increase in the next 12 months.
 
A majority believe the construction and homebuilding industry is in worse shape than it was one year ago, with 59 percent saying they believe the industry has gotten financially weaker over the past 12 months. Consumer confidence also took a big hit, with the RBC Confidence Index dropping to 45.9, its lowest level in six months and markedly down from 63.9 in the August report.
 

Job worries remain high

 
The report links declining confidence to increasing consumer concerns over the economy and employment. Nearly one-third of those surveyed expressed concerns about possibly losing their own job, while nearly half said they know someone who has lost a job due to the economy.
 
"As long as Americans are worried about their jobs, consumers' outlooks will remain volatile," said Marc Harris, Co-Head of Global Research at RBC Capital Markets. "Despite assurances that the Federal Reserve will intervene if necessary to support the economy, consumers continue to be wary about the direction of the economy and the country more generally. Until they see concrete evidence of a solid, long-term rebound, consumers will likely remain jittery."
 
Concerns over housing in particular appear to be linked with a sharp 27 percent plunge in existing home sales in July, recently reported by the National Association of Realtors. Foreclosures have also been edging up lately, as homeowners exhaust possible remedies for keeping their homes.
 
Forty-five percent said they expect the economy to worsen over the next three months, while only 12 percent said they expect it to improve.
 

Personal finances expected to improve

 
At the same time, the survey suggested Americans are feeling more upbeat about their own finances, with 27 percent saying they expect to be better off financially in six months, versus 21 percent who expect their finances to worsen.
 
That may be because Americans seem to be increasingly focused on paying off debt, with 24 percent saying they expect to reduce their debt over the next three months, compared to 21 percent in August.  
 
"With economic growth stagnating and housing sales tailing off, consumers are cautious about spending,” Harris said. “In fact, similar to banks themselves, Americans appear to be in the process of 'deleveraging' and paying down their credit and debt."
 
Results are based on a survey of more than 1,000 adults conducted over several days last week.

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