Pessimism as Nation's Real Estate Slump Hits Wealthy Areas

It's typical that the wealthy claim the economy is rebust until it intrudes into their world---then it stinks. ---BBB

Pew Research Center for the People & the Press
Economic Pessimism Grows as Nation's Real Estate Slump Hits Wealthy Areas
Republicans Less Upbeat About Economy and Housing Markets
October 11, 2007

Public assessments of the nation's economy have fallen to a two-year low, and the nation's economic outlook remains relatively gloomy. In particular, faced with a steady stream of negative news about the U.S. housing market, Americans are substantially less inclined than they were even a few months ago to say they expect home prices to increase over the next few years. People living in areas with the most expensive homes and middle-income Americans are particularly likely to say that future home prices will decline.

Overall, 53% of Americans think local housing prices will climb in the next few years, down from 62% in June, while the number expecting prices to fall has increased from 28% to 36%. Market predictions differ by the value of housing near where a person lives. In metropolitan areas where the median single-family home sells for $300,000 or more, nearly as many people believe prices will go down (45%) in coming years as say prices will go up (47%). By comparison, most people in metropolitan areas where home prices are lower foresee at least modest gains in housing values.1

Nationally, Republicans, middle-income Americans and residents of the West and Midwest have become less bullish about the real estate market. Only about half of Republicans (51%) now believe that home prices will rise in coming years, down from 66% in June. Fewer people with annual household incomes of between $30,000 and $49,999 also see house prices increasing (50% vs. 64% in June). Regionally, the largest decline has come in the West (13 points), followed by the Midwest (11 points). Southerners are slightly less likely to say prices will go up than they were in June, but they are substantially more likely to say so than people living in any other region.

The national survey by the Pew Research Center for the People & the Press, conducted September 12-16 among 1,501 adults, finds that a solid majority (65%) believes that over the past few years, home prices have gone up a lot or a little in their areas. However, the proportion saying that home prices have gone down over the past few years has jumped up in just the last three months - from 18% to 27% currently.

Moreover, people have decidedly different impressions of local real estate conditions over the past year than over the past few years. Just half of Americans say that, over the past 12 months, home prices have gone up in their areas, while 40% say prices have declined. By contrast, 65% say prices have gone up over the past few years, while fewer than half as many (27%) say prices have fallen over this longer timeframe.

People who live in areas with higher-cost housing are the most likely to say prices have gone down over the past year. A solid majority (54%) of those living in metropolitan areas with median home prices of $300,000 or more say home prices in their area are lower today than they were a year ago. That view is shared by 44% of those living in areas with median prices in the $200,000 to $299,000 price range. By contrast, the majority of people living in less costly areas say that home prices in their communities have risen in the past year.

Nationally, those with higher incomes more often say prices in their areas have fallen: 52% of those in households with annual incomes of $75,000 or more in income say prices have gone down, compared with 32% for those in households with incomes of less than $30,000.

Regionally, Midwesterners are the most inclined to believe that prices had fallen in their areas, followed closely by Westerners. Suburbanites are substantially more likely than their urban or rural counterparts to note declines in home prices, and those with more than a high school education see declines more often that those with a high school diploma or less education.

More Republicans than independents or Democrats say home prices have fallen. This follows a larger trend seen in the latest poll in which Republicans have adopted more negative views on several key economic questions.

Negative Views of Economy

Americans are not optimistic about national economic conditions or the country's financial future. More than seven-in-ten (72%) rate the economy as "only fair" or "poor," while only about a quarter (26%) says the economy is "excellent" or "good." Looking ahead, most people (53%) expect national economic conditions to be the same a year from now, while others are split over whether it will be better (19%) or worse (23%).

Positive views of the economy have slipped since June, when 33% rated the economy as excellent or good. Opinions about the economy remain divided along partisan lines, with Republicans expressing more positive views than either Democrats or independents. But Republicans are noticeably less upbeat than they were in the summer.

Currently 46% of Republicans say the economy is excellent or good, down from 56% in June. Independents also are slightly less positive about the economy; 23% say the economy is excellent or good, compared with 29% in June. Democratic opinions have shown less change, but Democrats remain overwhelmingly negative about the state of the economy.

College graduates and people with relatively high annual household incomes also express less positive opinions about the economy than in June. The proportion of each group saying that the economy is excellent or good has declined by 10 percentage points.

Substantial numbers in nearly every demographic and political group cite negative words to characterize their view of the economy. Even among Republicans, negative words outnumber positive ones by 51% to 26%, with 20% using a neutral word or phrase.

Read the full report at people-press.org
http://pewresearch.org/pubs/611/economic-pessimism

Notes

1Analysis limited to 145 Metropolitan Statistical Areas (MSAs) where median prices for single-family homes were available from the National Association of Realtors.