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Homebuyer optimism grows statewide

However talks of mortgage reductions are alarming

Posted: December 12, 2012 9:45 p.m.
Updated: December 12, 2012 9:45 p.m.

Real estate agent Jim Klinge, right, hosts an open house in San Diego in June 2012. In a survey, a realty association found homebuyers are more optimistic than they have been in the past three years.

Homebuyers are the most optimistic about the housing market than they have been in three years according to a 2012 survey by the California Association of Realtors.

Twenty-five percent believe prices will rise in one year, compared to only 8 percent in 2009. None of the buyers felt prices would drop in the future, which mirrors a big jump in the consumer confidence index from 37 percent in January 2009 to nearly 74 percent in November of this year.

Buyers, 45 percent of them, also cited price decreases as a driving factor for buying a home. Only 12 percent were seeking a better location.

Surprisingly, given the consumer confidence index and historic record-low mortgage rates, only 11 percent of the 800 statewide respondents cited good prices and financing as reasons for purchasing a home.

As for the process of buying a home, more people encountered extreme challenges obtaining financing with buyers rating their difficulty in securing a loan at 8.5 on a scale of one to 10, up from 8.0 in 2011.

Higher down payments have become the norm as well, with buyers putting an average of 25 percent down on their home purchase. The average down payment was higher than the traditional 20 percent buyers put down on a home in 2009.

Buyers do seem to be seeking more certainty as the market recovers, with 93 percent of buyers obtained a fixed rate loan – up from 84 percent in 2009.

The subject of making changes in the mortgage interest deduction, however, is not only the subject of discussion in the “fiscal cliff” debates in Congress – it is also the focus of homebuyers.

“It’s clear that homebuyers at all income levels and ages value the tax deductions associated with purchasing a home,” said CAR President Don Faught.

“The mortgage interest deduction plays an important role in buyers’ monthly budgeting,” he said. “Without this tax advantage, housing affordability would be negatively impacted and potentially price out many would-be buyers.”
In the survey, 79 percent of all homebuyers said that the mortgage interest and property tax deductions are “extremely important” in their decision to buy a home.

And when broken out by income levels and age groups, the responses were similar across all groups. The deductions are equally important to the vast majority of all homebuyers, the survey found.
Eligible respondents for the survey all closed escrow on their new homes within a six-month period prior to August 2012.


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