Home prices rising, but troubles for housing market not over, poll says

Home prices notched their biggest year-over-year gains since before the recession. But tight credit and 'under water' mortgages constrain the market, a Christian Science Monitor poll finds.

As real as the housing recovery is, a new poll finds that home buying is still hampered significantly by challenges such as tight credit and a constrained supply of homes for sale.

And those hurdles are mirrored on the side of would-be home sellers. The poll finds that many are restrained by “under water” mortgages that make it hard to exit from their current home.

The Christian Science Monitor/TIPP survey, conducted last week, comes as home prices have been rising and as mortgage interest rates remain at historic lows.

Home prices in February were up 10.2 percent compared with 12 months earlier, according to a CoreLogic index released Wednesday. That's the biggest year-over-year price gain since March 2006, prior to the recession. 

Meanwhile, the average interest owed on new 30-year fixed-rate mortgages is just 3.76 percent, the Mortgage Bankers Association reported Wednesday in its weekly mortgage index report. That’s for loans with a 20 percent down payment, conforming balances ($417,500 or less), and “points” or fees equal to 0.43 percent of loan value.

Low interest rates have helped fuel a gradual housing recovery.

“On a year-over-year basis, purchase applications are up about 4 percent, in line with the trend we are seeing in home sales volumes,” Mortgage Bankers Association vice president Mike Fratantoni said in releasing the new data.

At the same time, economists widely acknowledge that the housing market still faces head winds. The Monitor/TIPP poll offers a fresh snapshot of some of them:

• About 1 in 4 Americans would like to move (either to a rented or owned home), with a significant minority of would-be movers (28 percent) hoping to find a less expensive place.

• Among the poll respondents who want to move, about 8 in 10 said some challenge in the housing market, such as tight credit, was a concern to them. More than one-third said that more than one of five challenges listed in the survey affected them. The details follow.

• Half of would-be movers said a worry for them is that “prices or rents are too high.”

• One-third of them listed “good housing is hard to find” as a concern. In part, that may echo the concern about high prices, but it also reflects how many markets have a lean inventory of homes for sale.

• Some 28 percent of them said they don’t have enough cash for a down payment.

• One-fourth of them said it’s hard to get loan approval – a sign that low interest rates don’t mean that credit is widely available.

• And 16 percent of them cited “negative equity” in their home, so that it’s hard to pay off their current mortgage. These so-called under-water mortgages, with balances larger than the home's value, are one reason why the inventory of homes for sale isn’t larger.

That negative-equity factor may not sound huge, but this poll result implies that this factor may weigh on a million or more homeowners who would like to sell and move. Right  now, the sales pace for previously owned homes is about 5 million per year.

The Christian Science Monitor/TIPP poll, conducted by TechnoMetrica Market Intelligence, surveyed Americans during the week of March 25 to March 30. The responses by 242 would-be movers have a margin of error of about 6.5 percentage points.

In all, the survey reflects lingering challenges in the economy, almost four years after the recession’s official end.

Federal Reserve efforts to keep interest rates low helped to stabilize the job market three years ago, and to end a downward spiral in home prices.

But for many potential buyers, credit conditions have become tighter and housing costs don’t feel cheap.

Still, in many markets, homes are more affordable than they were before the recession. Prices are now generally rising, and construction activity is starting to revive.

Another nationwide poll, conducted monthly by the mortgage firm Fannie Mae, registers how consumer attitudes toward the housing market have improved since the depths of recession.

On average, Americans expect home prices to rise 2.9 percent over the next year, the highest forecast they’ve had since the Fannie Mae survey began in 2010. Half of respondents expect home prices to rise, while 10 percent predict declines.

Twenty-five percent of respondents say it is a good time to sell a house, the highest level since the survey began in 2010. Some 73 percent see it as a good time to buy.

Two-thirds say that, if they were going to move, they’d like to buy rather than rent. That number rose by two percentage points in the February survey, compared with a month earlier.