A recent home buyer survey indicates California home buyers are optimistic about today's housing market. In fact, none of the California home buyers responding to the survey felt prices would drop in the future. Buyers also indicated that the mortgage interest deduction is important to them.
According to the California Association of Realtors "2012 Survey of California Home Buyers," home buyers believe home prices will continue to rise in the future. This finding echoes a jump in the consumer confidence index from 37.38 in January 2009 to 73.7 in November 2012. Buyers cited price decreases (45 percent), the desire for a better location (12 percent), and favorable prices/financing (11 percent) as reasons for purchasing a home.
Twenty-five percent of buyers surveyed believe prices will rise in one year, while 41 percent anticipate home prices will rise in five years. Nearly three-fourths of buyers (73 percent) believe home prices will rise in 10 years. This compares to only eight percent, 35 percent, and 60 percent, respectively, in 2009, when the question was first asked.
Buyers continue to experience tighter lending standards and extreme challenges in obtaining financing. On a scale of one to 10, with 10 being extremely difficult, buyers rated their difficulty in obtaining financing at 8.5 on average, up from 8.0 in 2011.
Higher down payments appear to be the norm for the market these days. The survey found buyers put an average of 25 percent down on their home purchase. The average down payment has been higher than the traditional 20 percent since 2009, when the question was first asked.
The survey also found that the mortgage interest deduction is extremely important to home buyers across all income levels and age groups, with 79 percent of all home buyers saying that the mortgage interest and property tax deductions are "extremely important" in their decision to purchase a home. When broken out by income levels, the findings were similar across all income levels, with 80 percent of those earning less than $100,000 annually; 78 percent earning between $100,000-$199,999, and 81 percent earning more than $200,000 annually saying the deductions were "extremely important" in their buying decision, respectively.
"There is no doubt that our housing market is recovering nicely and the mortgage interest deduction matters to most Americans. This is why it is very important that Congress realize any changes to the mortgage interest deduction now or in the future could place the housing market and our nation's economy in jeopardy, and close the door on the American dream for many Americans," says Silicon Valley Association of Realtors president Suzanne Yost.
Realtors are being called to action at the national, state and local Realtor levels to contact their members of Congress and urge them to keep the mortgage interest deduction intact. There is much speculation that the once sacred cow of housing could be on the chopping board in order to avoid a "fiscal cliff."
Realtors say losing the MID will disproportionately affect the middle class because a larger proportion of the middle class takes the deduction. The MID benefits primarily middle- and lower income families - 65 percent of families who claim the MID earn less than $100,000 per year; 91 percent who claim the benefit earn less than $200,000 per year.
Current law permits deductions of the interest paid on mortgage debt of up to $1 million on a primary residence and one additional residence. In addition, the interest paid on home equity loans of up to $100,000 may be deducted. Plans to reduce the MID by as much as $500,000 and/or limiting this benefit to a primary residence are being floated around in Congress.
The state Realtor group's 2012 home buyer survey was conducted by telephone to 800 people statewide who closed escrow on their new homes within the six months prior to August 2012.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.