With mortgage rates running near 20-year lows and a wide inventory of homes to choose from, will 2008 bring a turnaround from last year’s disappointing housing performance?
A new survey of Wisconsin residents shows many reasons for optimism, but also points to several areas of concern as the key spring selling season approaches.
A recent public opinion survey by the Wisconsin REALTORS Association shows that three out of four Wisconsin residents (75%) recognize it is a good time to buy a house. Older residents who have experienced past housing cycles and have more knowledge about the real estate market – adults aged 55 to 64 – agree even more strongly, with 82.8 percent saying it is a good time to purchase a home.
The REALTOR poll was part of a recent Checkpoint economic and public affairs survey of 400 state residents conducted between Jan. 15-20 and carries a margin of error of plus or minus 5 percentage points.
The survey shows state residents understand that Wisconsin’s housing market has not been immune to the trends affecting the rest of the nation. But at the same time, many people recognize things are better here than in other states.
Thirty percent of Wisconsin residents agree that our housing and real estate market is better off than the rest of the country, while 51 percent say it is about the same and 14 percent say it is worse.
So, why have sales been slacking? Among the factors that may be keeping some potential buyers out of the market – and also hurting some existing homeowners – is a lack of understanding about interest rates and mortgage financing options.
Currently, interest rates on 30-year fixed-rate mortgages are running in the 5.5 percent range nationally. Although recent economic stimulus actions by the Federal Reserve have created some uncertainty and caused rates to fluctuate, today’s rates are averaging close to 20-year lows and homes today are more affordable than they were throughout the 1970s and a good part of the 1980s.
This fact appears to be lost on many consumers, who, instead of looking at the long-term picture may be getting caught up in watercooler conversations about whether rates could still be headed lower. According to the REALTORS survey, 33 percent of residents say mortgage rates are very high or somewhat high, while 41 percent say rates are “about right.’’
Just 13 percent recognize that interest rates are currently low while another 13 percent say they are unsure or have no opinion.
One issue that may be playing into all of this is that some current homeowners purchased their properties with loans carrying an adjustable rate. Often drawn in by attractively low rates for the first year or two, these residents are now feeling pinched as their monthly principal and interest payments are adjusting upwards.
Mike Theo, vice president of the Wisconsin Realtors Association, says the survey results point to the need for increased sensitivity to issues regarding the cost of home ownership, particularly Wisconsin’s high property taxes.
“Home ownership is key to achieving long-term financial security for families and it is the single biggest investment most of us will ever make,’’ Theo said.
“Across the board, roughly two-thirds of Wisconsin residents favor policies that will provide property tax relief in some form. We believe this will further improve the affordability equation and help reduce the financial stress many families are feeling.’’
Reducing reliance on the property tax as a means to fund local government services is also a sure way to provide an incentive to those who have been looking for a reason to buy a home. And reinvigorating the housing market may be an important step in boosting the overall economy, as well.
Sereno, former business editor of the Wisconsin State Journal, is a senior manager at Wood Communications Group in Madison. E-mail jenny.sereno@wcgpr.com or call (608) 770-8084.
