Experian-Gallup Survey: Seven in 10 Consumers Expect Housing Bubble to Burst in Next 12 Months According to the latest Experian-Gallup Personal Credit IndexSM survey, 71% of consumers say it is likely that a housing bubble and collapse of prices could occur in the United States within the next year. Twenty-four percent say such a housing bubble is not likely. In contrast, a much smaller number of consumers, 32%, expect the collapse of a housing bubble within their own area in the next year, and 65% say it is not likely.
When the time is extended to three years, 42% say such a situation is likely in their area, and 56% say it is not. In May 2005, a similar question found a slightly less pessimistic view, with 37% of consumers expecting a housing bubble and collapse within the next three years and 61% saying that was not likely. This year, about half of all Americans (53%) recognize the term “housing bubble” without explanation—up from 35% a year ago.
“While consumers are clearly concerned that housing activity will slow this year, it is somewhat reassuring that they are much less pessimistic when talking about the conditions where they live as opposed to the nation as a whole,” says Ed Ojdana, group president of Experian InteractiveSM. “The relatively small number of consumers expecting significant housing price declines is also a positive sign given consumer expectations of a housing slowdown.”
When it comes to predicting changes in housing prices in their own areas, 38% of consumers say they expect housing prices to stay the same (27%) or decline (11%) over the next year—up from 29% a year ago. Sixty percent expect an increase.
Among all consumers, 41% expect housing prices to rise by at least 5%, including 20% who expect increases of at least 10%. At the other end of the spectrum, only 7% of all consumers expect housing prices to fall by at least 5%, including 4% who expect prices to fall by at least 10%.
One-third of homeowners have a home-equity loan or line of credit. The main reason for taking out an equity loan or line of credit was to finance home improvements, mentioned by 43% of borrowers. Another 10% cited debt consolidation as the reason for such a loan. Credit card debt, mentioned by 4% of borrowers, followed by an emergency (4%), education expenses (3%) and medical expenses (2%), round out the specifically named reasons. Another 30% cite some other reason.
“Increasing home prices and the ability of consumers to cash out their growing home equity has been a key driver of consumer spending over the past several years,” says Dennis Jacobe, chief economist for The Gallup Organization. “As the housing market slows and housing prices stabilize, consumers are less likely to draw on their home equity, suggesting consumer spending will also decline.”
Over the next six months, just over 10% of all consumers expect either to borrow money to buy a new home (6%) or to refinance their home (2%) or to borrow money on their current home by either a home- equity loan (1%) or a home-equity line of credit (1%).
Number of respondents who say that a housing bubble and collapse of prices could occur in the U.S. within the next year:
71%—likely
24%—not likely
Number of respondents who expect the collapse of a housing bubble within their own area in the next year:
32%—likely
65%—not likely
More numbers:
41%—expect housing prices to rise by at least 5%.
Of those 41%, 20% expect increases of at least 10%.
7%—expect housing prices to fall by at least 5%.
Of those 7%, 4% expect prices to fall by at least 10%. |
