Poll Finds Homeowners Expect Home Values to Continue to Grow

Most American homeowners expect selling prices to keep rising, a recent study found.
By: Tara Siegel Bernard: The Wall Street Journal Online
They also don't believe that gains in their own homes have affected how they spend, despite what Alan Greenspan says.

Most American homeowners expect home values to keep rising and don't believe that gains in their own homes have affected how they spend, a recent study found.

That conflicts with Federal Reserve Chairman Alan Greenspan's recent research, which found that consumers have become very dependent on borrowing against their homes to fuel their spending -- and that a rise in mortgage rates may crimp expenditures.

Still, only 10% of homeowners polled said they believe that rising real-estate values had affected their spending, according to a survey of 1,001 consumers conducted this month by Royal Bank of Canada's RBC Capital Markets unit.

Some 85% of homeowners surveyed said they had experienced real-estate gains in the past three years, and more than 70% saw gains of more than 10% in that period, the study found. But more than half of those surveyed said they firmly disagreed with the idea that their spending had changed, even though half of all respondents had extracted equity from their homes through refinancing, home-equity loans or lines of credit.

"These findings raise the question of whether people spend more freely than they otherwise would because of their real-estate gains, and they simply don't recognize it," said Scot Ciccarelli, a managing director at RBC Capital Markets. "If that's the case, a simple slowing of real-estate gains, not just a fall in housing prices, could have a significant adverse impact on spending patterns."

Almost 60% of homeowners polled by RBC said they expect their home values to rise by at least 5% annually in the next several years, and a quarter of those respondents anticipate annualized gains of 10% or more in the next few years. Only 3% said they expect their home prices to decline in the same period.

Rising gas and energy prices, however, are having an effect already, with 60% of respondents saying those costs were causing them to pull back their spending.

RBC conducted the survey with assistance from InsightExpress, an online market-research firm based in Stamford, Conn., during the week of Sept. 19. The sample was spread across geography, gender and income brackets, to make it representative of the general U.S. population. The survey's margin of error was plus or minus 3%.

Email your comments to rjeditor@dowjones.com.