Interest, Stigma Surrounding Foreclosures Lessens
Surprisingly, interest in purchasing a foreclosed property has dropped among Americans in the past year even as stigma around foreclosure purchases has also declined. Currently, 45% of US adults age 18 and older are at least somewhat likely to consider purchasing a foreclosed home in the future, compared to 55% in May 2009.
However, the current survey also found lower levels of negative sentiment towards purchasing foreclosed properties than one year ago, with 78% of US adults believing there are downsides to buying foreclosed properties, compared to 85% in May 2009. Among those who think there are negative aspects to purchasing a foreclosed home, the top concerns about purchasing a foreclosed property between May 2010 and May 2009 include:
Consumers Expect Lower Foreclosure Cost
Eighteen percent of US adults expect bank-owned homes to offer what Trulia and RealtyTrac term a “realistic” price discount of less than 25% off the value of a similar home that was not in foreclosure.
However, not all consumers have what Trulia and RealtyTrac consider realistic expectations, with 36% saying that they expect to receive a discount of 50%or more when purchasing a bank-owned property. Most consumers (95%) expect to pay less for a foreclosed home than for a similar home for sale that is not in foreclosure.
Reasons for Purchasing a Foreclosure
Among US adults at least somewhat likely to purchase a foreclosed home, 62% said they would use the property for their personal primary residence, 19% said they would use it as a rental investment, 8% said they would use it as a second home or vacation home, and 6% said they would buy and quickly resell (or flip).
Renters were more likely to say they would purchase a foreclosed property as a primary personal residence (83%), while more than half of homeowners (51%) said they would purchase a foreclosed property for a use other than a personal primary residence.
Most Homeowners Won’t Abandon a Mortgage
It may take a foreclosure to get many homes on the market. Only 1% of homeowners with a mortgage say walking away from their home would be their first choice if they were unable to pay their mortgage. If their mortgage were to go “underwater,” 41% would at least consider walking away, while 59% would not consider walking away no matter how much their mortgage was underwater.
Pete Flint, co-founder and CEO of Trulia, says these statistics do not bode well for the US housing market. “It now seems clear that government programs will not reach the overwhelming majority of homeowners in trouble,” said Flint. “Combined with decreased consumer interest around purchasing a foreclosure, it may take even longer than anticipated to see true health return to the real estate market.”
Homeowners Plan 2010 Improvements
Despite believing a seller’s market is not coming soon, a majority of US homeowners plan to invest money in home improvement projects this year, according to the April 2010 American Express Spending & Saving Tracker.
A 53% majority of US homeowners believe a seller’s market is two or more years away, yet investing in their current home remains a priority. In fact, 62% of homeowners plan to embark on home improvement projects in 2010 and spend an average of $6,200 on enhancements.
About the Data: This May 2010 survey was conducted online within the US by Harris Interactive on behalf of Trulia between May 10-12, 2010 among 2,596 U.S. adults aged 18 years and older. The sample included 1,690 homeowners, 1,137 of whom currently have a mortgage, and 832 renters. Figures for age, sex, race/ethnicity, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. Propensity score weighting was used to adjust for respondents’ propensity to be online.