Fannie Mae Survey Shows Americans Still Bearish on Housing, Economy

Fannie Mae’s latest National Housing Survey showed that Americans are not particularly bullish about housing, or the economy in general, which should come as no shock due to the number of people that were absolutely burned by the housing market over the past several years.  Fifty-seven percent of Americans believe that home purchases have good investment potential, higher than the amount that are optimistic about stocks, Roth IRAs, or 401(k)s.  However, only 66% of Americans term housing a “safe” investment, down from 83% in 2003.

Doug Duncan, VP and Chief Economist for Fannie Mae commented:

“Despite moderate signs of improvement in the housing market and the overall economy, consumer attitudes continue to be shaped by ongoing concerns about the recovery and their own financial situations.  Uncertainty regarding the improving labor market, expectations of little home price and interest rate movement, and rising household expenses has left consumers feeling less financially secure and translates into weak mortgage demand. While we have seen indications of improving economic activity in recent months, especially the strengthening of private sector employment, consumers’ attitudes improved only marginally, and in some areas not at all, from a year ago, reflecting the continued unevenness and uncertainty of this recovery.”

Frankly, I’m not seeing significant gains in the employment sector.  Despite adding nearly 250,000 jobs last month, the unemployment rate jumped to 9.0% as more Americans re-entered the workforce.  The workforce participation rate is still close to 25 year lows, and the pace of job creation we are seeing pales in comparison to the number of jobs lost during the recession.  At this rate, it will be many years until we see unemployment return to normal rates.  My home state of Connecticut just announced massive layoffs of state workers, although some of this is posturing for union negotiations.  The fact of the matter is we need to see months where 5-600,000 jobs are created before people will start feeling better about the employment situation.  We may have stopped the bleeding, but the patient is still in critical condition.

It doesn’t help that the Federal Reserve is sitting on their hands when it comes to job creation.  Supposedly inflation is under control, but that is only true if you exclude food and gas prices, which are quickly increasing and also make up a large percentage of the household budgets of many Americans.  But hey, QE2 sure did buoy the stock market!  Despite what many experts claim, survey results seem to indicate that many Americans feel as I do:

• Thirty-three percent of Americans believe the economy is on the right track, which is up from 29 percent last quarter, but almost exactly the same as it was at the same time last year.
• 42% of those surveyed believe their personal fianances will improve over the next year, up 2 percent from the last quarter.
• 40% say their household expenses are significantly higher than last year, up from 34 percent last quarter.
• 27% percent of underwater borrowers believe it is ok to walk away from their homes, nearly doubling from last quarter.