Owners Optimistic About Home Values
The pullback in the Florida housing market is well-documented - but consumers’ real estate appreciation expectations may still be too optimistic, 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, down from almost 60 percent of homeowners last year. But surprisingly high considering the recent slowdown in prices.
The national survey of 1,003 Americans also revealed that 25 percent of homeowners have already paid off their national or Florida mortgage - twice the number of people with risky variable and interest-only mortgages (13 percent).
“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 than 80 percent of all those 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. Nearly 40 percent of those with such nontradtional Florida home loans are concerned with their ability to meet higher payments, while 13 percent haven’t even considered the ramifications.
“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’s concerned about those people with variable and interest-only mortgages. They don’t seem prepared to deal with rate hikes and are yet to consider Florida home mortgage refinancing.
