Economy

Americans Expect Housing Slump to Last Several Years

Most favor government help for those in danger of losing homes

PRINCETON, NJ -- As reported earlier on this site, Americans are about equally likely to name the economy as they are to name the Iraq war as the most important problem facing the country. A poor housing market and high energy prices are two of the reasons often discussed in the news media to explain why Americans are nervous about the economy. A recent Gallup Panel survey explored the public's views about each of these economic threats. Americans expect the housing market to continue to struggle until at least 2009, if not longer. The public also appears to favor government action to help those with subprime mortgages in danger of losing their homes. Asked how they would deal with rising energy prices, Americans say they are more likely to cut back on their energy usage than to keep their consumption the same but make up for the rising costs by cutting back on spending in other areas.

The Housing Market

The results of the Dec. 10-13 survey suggest that Americans believe the housing slump will not end anytime soon. Only 18% believe the market will recover within the next six months (3%) or the next year (15%). Close to half, 46%, believe it will be two to three years before the housing problems are overcome. And roughly one in three are even more pessimistic, believing the problems brought on by the wave of foreclosures fueled by subprime mortgages will continue to affect the economy for four years or longer.

These expectations are generally the same among most major subgroups. Democrats, however, are more likely to predict that the effects will be felt for four or more years (41%) than are independents (34%) or Republicans (27%).

Mindful of the effects such housing losses can have on the national economy, the Bush administration has announced a program to help some borrowers avoid foreclosure. Americans are more likely to endorse than oppose government involvement to address the problem, as 61% say they favor the federal government taking steps to help prevent subprime borrowers from losing their homes, while 37% are opposed.

Republicans have mixed feelings about government intervention -- 47% favor and 49% oppose federal government action to help potential foreclosure victims. Most independents (66%) and Democrats (68%), however, think it is appropriate for the government to get involved.

Support for government assistance may stem from the fact that many Americans blame the mortgage mess on the banks and other lending institutions that issued the loans rather than on the borrowers who took out the loans. According to the panel survey, the majority of Americans say the mortgage lending companies are completely or mostly to blame for the problems, while only about 3 in 10 say the borrowers are entirely or mostly at fault.

A CNN/Opinion Research poll conducted a few days before the Gallup survey found that while many blame the banks for "bad lending policies," slightly more believe the borrowers are ultimately responsible for entering into the agreement.

These somewhat conflicting results indicate that Americans believe both the borrowers and lenders are responsible for the problems. But on the question of who is more responsible, their views are not strongly held, so that the ultimate verdict on who is more to blame is influenced by the wording of the poll question.

Rising Energy Costs

Even those who are in no danger of losing their homes are going to have to pay more to heat them this winter, and pay more to travel to and from home, given the steep rise in energy costs in recent months. The poll asked separate questions designed to assess how Americans would deal with these higher energy costs. In general, the results indicate that Americans prefer to cut back on energy usage rather than cutting back on spending in other areas.

In terms of home heating costs, 58% of Americans say they are more likely to implement energy-saving practices such as turning down the thermostat setting, while 24% would opt to continue to use energy at their current rate but to spend less in other areas to compensate.

Likewise, by a 52% to 31% margin, American consumers say they are more likely to cut back on driving to use less gas as opposed to continuing to do the same amount of driving but reducing spending in other areas.

There are gender differences in both cases, with women more likely than men to say they would opt for conservation steps over reducing spending elsewhere.

Implications

While home foreclosures affect only a small proportion of Americans, the rising number of these can have a reverberating effect throughout the economy. For example, even those with good credit may find it more difficult or expensive to borrow money, and those looking to sell their homes may struggle to do so as foreclosed homes saturate the market. The public expects the housing market to struggle for at least a few more years. Coupled with the uncertainty of the housing market is the rising cost of fuel, which affects homeowners and renters alike.

These twin economic threats are certainly contributing factors to Americans' gloomy economic outlook, which is among the worst Gallup has measured in the last 15 years. If the public is correct in predicting a persistent housing slump, its economic perspective may not improve anytime soon.

Survey Methods

Results for this Gallup Panel study are based on telephone interviews with 1,008 national adults, aged 18 and older, conducted Dec. 10-13, 2007. Gallup Panel members are recruited through random selection methods. The panel is weighted so that it is demographically representative of the U.S. adult population. For results based on this sample, one can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

For results based on the 517 national adults in the Form A half-sample and 491 national adults in the Form B half-sample, the maximum margins of sampling error are ±6 percentage points.

Gallup http://www.gallup.com/poll/103372/Americans-Expect-Housing-Slump-Last-Several-Years.aspx Gallup World Headquarters, 901 F Street, Washington, D.C., 20001, U.S.A +1 202.715.3030