Consumers Pessimistic About Housing, Borrowing
Nearly three-quarters (71%) of Americans are expecting the housing bubble to burst and prices to collapse sometime in the next year, according to a new Experian-Gallup Personal Credit Index survey. Twenty-four percent say such a housing bubble is not likely. But when asked whether such a collapse will occur within their own area, just 32% said agreed, while 65% said it's not likely.
According to Experian-Gallup, when the time is extended to three years, 42% said such a situation is likely in their area, and 56% say it is not. In May 2005, a similar question found a slightly less pessimistic view, with 37% of consumers expecting a housing bubble and collapse within the next three years and 61% saying that was not likely. Experian-Gallup reported that this year, about half of all Americans (53%) recognize the term "housing bubble" without explanation-up from 35% a year ago.
When it comes to predicting changes in housing prices in their own areas, 38% of consumers say they expect housing prices to stay the same (27%) or decline (11%) over the next year-up from 29% a year ago. Sixty percent expect an increase.
Among all consumers, the survey found that 41% expect housing prices to rise by at least 5%, including 20% who expect increases of at least 10%. At the other end of the spectrum, only 7% of all consumers expect housing prices to fall by at least 5%, including 4% who expect prices to fall by at least 10%.
Meanwhile, the survey also found that one-third of homeowners have a home-equity loan or line of credit. The main reasons cited for taking out an equity loan or line of credit was to finance home improvements (43%) debt consolidation (10%), credit card debt (4%), to cover an emergency (4%), education (3%), and medical expenses (2%).
Over the next six months, just over 10% of all consumers expect either to borrow money to buy a new home (6%) or to refinance their home (2%) or to borrow money on their current home by either a home-equity loan (1%) or a home-equity line of credit (1%). Only 15% of consumers say now is a good time to borrow more money, down from 20% last month. Future concern about extending debt also contributed to the drop in consumers' feelings about their credit.