As Home Prices Rise, More Americans Say They Believe in Home Ownership

By Gretchen Wegrich

As home prices continue to rise, foreclosures are falling and perhaps even more importantly, consumer confidence in housing is increasing. Despite month-to-month inconsistencies in sales of new and existing homes, a growing number of consumers are getting ready to purchase a home, thanks to low mortgage rates and housing market improvements.

The percentage of Americans who believe owning a home is an essential part of the American dream is at a 3-year high of 79 percent, reported the CNBC All-America Economic Survey. Meanwhile, those who believe it is better to own than rent increased by 4 points to 69 percent.

In spite of a strong stock market, a majority of Americans surveyed said they believed that owning a home was a better long-term investment than purchasing stocks.

The rising numbers are a result of the return of first time home buyers to the housing market. Until now, first time home buyers had been causing the recovery to lag, making up barely a third of home buyers in February 2013 in comparison to the traditional norm of 40 percent. In March, this number rose to 34.5 percent of home purchase transactions. Buyer traffic has increased as well, reaching a four-year high.

“First-time homebuyers are the wildcard in the upcoming spring-summer home buying season,” Thomas Popik, research director for Campbell Surveys, told CNBC. “We see strong first-time homebuyer traffic, but it’s still not clear that the traffic will translate into increased purchases, because first-time homebuyers are dependent on low down payment financing, such as FHA mortgages.”

As first time home buyers show their interest, existing homeowners are showing disinterest, revealed the Campbell survey. At the same time, investor interest in housing reached a four-month high in anticipation of a recovering housing market. Sales of distressed properties is also up, a function of increased investor interest.  Investors, who usually buy in cash, are the main competition for regular home buyers. Investor activity is pushing prices significantly higher, a fact that is reflected in places like Phoenix, where home prices rose by 23 percent in January [S&P/Case-Shiller].

Although distressed home sales are down, the lingering effects of the housing crash are still preventing the market from making a full recovery. Currently, there are 5.1 million properties that have owners who are delinquent on their mortgage payments or the home is in the foreclosure process, reported Lender Processing Services. Banks are streamlining the foreclosure process, adding more distressed properties to the market.

The future outlook for renters may be bright, as more and more Americans choose to buy. New rental supply is expected to reach the market in the next two years as developers are increasingly focused on multi-family housing construction.  

Gretchen Wegrich

Gretchen Wegrich is an editor at Lender411. She specializes in mortgage basics, personal finance and green living. She graduated with a bachelor's degree in writing from University of California, San Diego and previously worked at the Santa Cruz Sentinel. Contact her at gretchen@lender411com.