U.S. home owners and investors are ambivalent about 2007
Having enjoyed the fruits of a year that was better than average in the stock market and a much weaker one in housing, home owners and investors appear neither exuberant nor glum about 2007.
In fact, they are decidedly ambivalent, according to recent New York Times/CBS News poll. They are split, for instance, almost evenly on whether it is a good time to buy a new home or better to wait, even though a sizable majority expects home prices to stay steady or rise, especially in their neighborhoods.
The poll also showed that Americans had regained some faith in stocks as a safe investment since the market’s crash in 2000, but they were less confident that stocks would rise next year than they were during the depths of the last bear market, in 2002.
The telephone survey was conducted from Dec. 8 to 10 and included 922 adults nationwide and has a sampling error of plus or minus three percentage points.
The seeming confusion and anxiety is not entirely new or limited to average Americans. Similar worries abounded in late 2005, when some economists and market experts predicted the nation’s long housing boom would come to a screeching halt and inflict damage on the economy and the stock market.
While home sales did plummet from records levels, the stock market rebounded to new heights after a brief stumble last summer. The Standard & Poor’s 500 stock index posted a 14 percent gain last year, its best showing since 2003. The American economy also put up stronger-than-expected performance as job growth and business investment made up for the faltering real estate market.
Still, in follow-up interviews, several of those polled last month said that while they were confident about their personal financial positions, they were preparing themselves for tougher times by either changing their spending and investment patterns or by not taking as many risks.
Christopher Pujol, an account manager at pharmacy benefits company in Texas, said he planned to shift some of the assets in his 401(k) account to cash from stock-based mutual funds because he does not think the market will match its 2006 performance. “The good times can’t go on forever,” he said. “I take a conservative approach and take money off the table.”
Pujol is not alone. Skeptical market experts have raised concerns about the durability of the recent rally. More broadly, economists are significantly divided about the outlook for the year, from the most pessimistic among them predicting a recession and the most optimistic saying economic growth could be so strong that it may force policy makers to resume raising interest rates to fight inflation.
“People seem to have a fairly balanced view about things,” said Robert McGee, chief economist at U.S. Trust, who reviewed results of the Times’ poll. “We have had a relatively strong housing boom and people recognize that is over, but at the same time the disappointment in stocks that occurred after 2000 and 2001 is dissipating some.”
The poll is in line with other recent surveys that show Americans are slightly more cautious, even though most of them have stable employment and are seeing their paychecks increase, said Lynn Franco, director of the consumer research center at the Conference Board, which produces a widely followed consumer confidence index. “Over all, it’s this glass half-full/half- empty scenario,” she said.
Pujol, who lives in Keller, Texas, near Fort Worth with his wife and their two young sons, thinks that economy will “moderate” in 2007. The family bought a new home four years ago and is not planning to move but Pujol and his wife have other real estate investments in Texas that he believes will fare better than property on the coasts.
Pujol reflected the view of most Southerners, 57 percent of whom said local housing prices would increase in the coming year and the same number said it was a good time to buy a house. Only 47 percent of people surveyed nationally said it was a good time to buy a house and 45 percent said local prices would increase. The difference may reflect the relative strength of housing in Texas, on the Gulf Coast and in the Carolinas.
Not surprisingly, home owners were also more upbeat on housing 52 percent said it was a good time to buy a home than renters, 60 percent of whom felt it would be better to wait. (Similarly, 65 percent of people who owned stocks or mutual funds said the stock market would go up next year compared with 39 percent of people who did not have investments.)
