Clueless Homeowners

[VJW]

From ‘Big Picture’:


CLUELESS HOMEOWNERS

* Only 10% of homeowners polled said they believe that rising real-estate values had affected their spending.

* 85% of homeowners surveyed said they had experienced real-estate gains in the past three years.

* 70% saw gains of more than 10% in the past three years.

* 50% had extracted funds through home equity loans.

* 60% expect home values to rise at least 5% annualy for the next 3 years.

* 3% expect home values to fall over the next 3 years.

* 60% said rising energy costs were causing them to reign in spending

Its fair to observe (as a commentor did at Matrix) that "only 10% said their spending had increased with the value of real estate, yet 50% had taken out loans against their equity. Is there a contradiction here?"

That's more than a contradiction; Its the entire underlying premise for why I believe a) Real Estate has been the key driver to the US economy; and 2) why so many people -- professionals included -- do not have a firm grasp on the underlying economy.

Any subsequent "retracement" will simply catch a majority quite unaware.

http://bigpicture.typepad.com/comments/2005/10/polling_homeown.html

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[34saving]

Re: Clueless Homeowners

I think your conclusions are probably right (regretfully), but one note: If the 50% used HELOC money to refinance other debt then they would not necessarily be spending more.

[VJW]

Re: Clueless Homeowners

Not my conclusions.

:]

All was taken directly from financial blog “BIG PICTURE”.

I found it very informative.

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[CRFSaver]

Re: Clueless Homeowners

There has been a very large substitution affect in the credit card market with people using home equity and HELOC's to pay down their credit card balances. Ironically though, even with that affect credit card balances are still growing between 2-5% a year. And I can tell you that is not all sub prime either. That is Prime and Super Prime customers.