Americans Express Confidence in the Value of Their Homes

Americans Express Confidence in the Value of Their Homes, Despite Softening Housing Market Majority Believe They Could Sell Their House for More Than They Could a Year Ago, According to a New Survey by The Boston Consulting Group

(Chicago, June 21, 2007)- Americans are confident their homes are retaining, even gaining, value, according to a nationwide telephone survey conducted this month by The Boston Consulting Group (BCG).

In fact, Americans are nearly as optimistic now about the rising value of their homes as they were a year ago, according to the research.

"Americans believe their homes are still their best investment. They're positive about their homes' value and believe in a bounce-back in residential real estate overall. Talk of declining average values of homes is not forcing a cutback in spending. It's just not translated into the American psyche," says BCG Senior Partner and consumer spending expert Michael J. Silverstein.

According to the survey:

*
55% of Americans say their home would sell for more money now than it would have a year ago. (Last summer, 59% of American homeowners felt that way.)
*
Nearly three-quarters (74%) of homeowners say they're confident they could sell their home within the next six months at a price they think it's worth.
*
85% of Americans believe their house will be worth more five years from now than it is today.
*
The majority - 63% - of Americans think real estate is a good or excellent investment.

Further, Americans say the residential real estate market is having very little impact on how they spend.

*
76% of Americans say the current real estate market has no impact on how they're spending now. (However, 16% say they're cutting back because of a perception of lower residential real estate values.)
*
Most homeowners - 69% - say they're likely to make renovations or improvements to their home over the next 12 months.
*
27% of Americans say they're likely to purchase a better home over the next five years.

"Consumers don't view blips in overall housing prices as a catastrophe. They take a very long-term perspective and don't move very often. Tales of the end of housing as the primary asset for American households are way over-told," says Mr. Silverstein, author of two recent books on the consumer economy and spending patterns, Treasure Hunt: Inside the Mind of the New Consumer (Portfolio, May 2006) and Trading Up: Why Consumers Want New Luxury Goods - and How Companies Create Them (Portfolio, 2004).

Despite optimistic views of their own homes' value, many Americans are, in fact, concerned about the real estate market's impact on the economy. Nearly half - 49% - say they believe the decline in housing prices is hurting the national economy "moderately." And 15% say they believe it's hurting the economy "severely." Only 12% say it's not hurting the economy.

Most Americans (52%) believe the residential real estate slump will last two years or less. Only 22% believe it will last for five or more years.

For more information, please contact: Eric Gregoire, +1 617 854 4570.

Survey Methodology

The public opinion data reported in this study are the result of a random and representative telephone survey conducted May 31-June 3, 2007, with 1,007 adult Americans, 18 years of age and older, living in the continental United States. The survey was designed in collaboration with Michaels Opinion Research, Inc.

Interviewing was conducted from a central telephone facility utilizing a random-digit-dial (RDD) sampling methodology to ensure that both listed and unlisted telephone numbers were included. All sample numbers selected were subject to up to four attempts to complete an interview.

Survey results have been weighted by four variables (age, sex, region and race) for reliable and accurate representation of the total U.S. population.

The margin of error for results based on the national sample of 1,007 is ±3 percentage points and is greater for smaller sub-groups of respondents.

About The Boston Consulting Group
Since its founding in 1963, The Boston Consulting Group has focused on helping clients achieve competitive advantage. Our firm believes that best practices or benchmarks are rarely enough to create lasting value and that positive change requires new insight into economics and markets and the organizational capabilities to chart and deliver on winning strategies. We consider every assignment to be a unique set of opportunities and constraints for which no standard solution will be adequate. BCG has 64 offices in 38 countries and serves companies in all industries and markets.

SOURCE: Boston Consulting Group - Press Release

NOTE FROM JOHN ELWELL - Some of the beliefs of the participants fly in the face of the reality that exists in the streets. Except for some very special markets, homes are not selling for more than they did a year ago. In fact, many are selling for less than they would have in late 2005. However, this is something we have to deal with as real estate agents every day. The sellers accept that their neighbors' homes are worth less, but they feel that their own home is "special", and therefore the rules of supply and demand do not apply to them. That is a hard hurdle to overcome. Only after several months of having their homes on the market with no activity at all, will many admit they were wrong and finally drop their price to current market levels.

Those participants who believe that in 5 years their homes will be worth more are very likely on target. As with the stock market, over the short term there can be highs and lows, but over the long term real estate has historically always risen eventually.