Survey: Half of consumers say housing price collapse possible

COSTA MESA
February 1, 2007 5:33am

Nearly half of all consumers (47 percent) say they think a housing bubble and collapse of housing prices is very likely (16 percent) or somewhat likely (31 percent) in their local residential real-estate market within the next three years, according to an Experian-Gallup survey.

This is up from the 37 percent of Americans who felt this way in May 2005 and the 42 percent voicing this opinion in April 2006 in similar polls paid for by Costa Mesa-based Experian.

Fears of a potential housing price collapse are greatest in the West (52 percent) and the East (49 percent) but lower in the Midwest (41 percent) and the South (44 percent).

Consumers with annual household incomes of $75,000 or more are somewhat less fearful of a collapse in housing prices (42 percent) than are those with incomes of $40,000 a year but less than $75,000 a year (50 percent) or those making less than $40,000 a year (48 percent).

Renters think that such a drop in housing prices is more likely (57 percent) than do homeowners (43 percent).

"Housing market conditions may not have reached bottom at this point, with 57 percent of renters thinking there is the potential for a price collapse in their local areas over the next few years and 18 percent of all Americans expecting prices to decline during the year ahead," says Ty Taylor, president of Experian Consumer Direct.

"Still, there is reason for optimism given the local nature of the residential real-estate market and the price resilience it creates, as reflected by the 47 percent of Americans who expect housing prices to increase over the next 12 months and the 33 percent who expect them to remain the same," he says.

About one in five consumers (18 percent) think the average price of houses in their local area actually will decrease over the next year. This is up from just 5 percent who felt this way in May 2005 and 11 percent in April 2006. Expectations for a decrease in average housing prices are greatest in the West (23 percent) and the East (22 percent) -- areas experiencing the sharpest run-up in prices during recent years -- and less pronounced in the Midwest (16 percent) and the South (11 percent). Twenty percent of consumers with annual household incomes of $75,000 or more say they expect housing prices to decline over the coming year, compared with 18 percent of those with incomes of $40,000 a year but less than $75,000 a year and 15 percent of those making less than $40,000 a year.

The results are based on a monthly nationwide survey of households and measures four key areas related to credit: level of debt, monthly payment burden, credit rating and debt extension capability. The sampling was conducted in October, November and December 2006 and included 3,053 adults, age 18 and over, randomly selected from across the country. The sampling error is plus or minus 2 percentage points.

Experian is a credit reporting company. It is owned by Experian Group Limits of Dublin, Ireland.