More than half of U.S. consumers expect home prices in their local market to return to their bubble-era highs within the next 10 years, according to the latest American Dream survey from real estate search and marketing site Trulia released this week.
Market research firm Harris Interactive conducted the biannual online survey for the company between May 22-24, gathering responses from 2,205 U.S. adults, including 1,402 homeowners and 731 renters.
Home prices rose in 86 of the nation’s 100 largest metro areas in the three months ending in May, rising 1.6 percent overall nationally compared to the previous three-month period, Trulia said.
Not surprisingly then, 61 percent of respondents expected local home prices to increase within the next year. But nearly as many — 58 percent — anticipated local prices to reach their pre-bust peaks within the next decade.
While renewed optimism is a plus for the housing market, "the pendulum may have swung a little too far," said Jed Kolko, Trulia’s chief economist, in a statement.
"Most people in markets that had the biggest price bubbles — like Las Vegas, Sacramento, and Detroit — expect local home prices to get back up to their previous highs in the next decade," Kolko said. "Although optimism helps the housing recovery, this much optimism about house prices could put us right back on the path to the next housing bubble."
Consumers are not only dreaming of bigger prices on the horizon, but bigger homes as well, the survey found. While consumers seemed to lose some of their taste for McMansions during the housing downturn in favor of smaller homes, more than a quarter of respondents (27 percent) said they would prefer homes more than 2,600 square feet, including 11 percent whose ideal home size was more than 3,200 square feet, Trulia found.
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Ideal Home Size |
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|
Size (Square Footage) |
Q3 2011 |
Q2 2012 |
|
800 to 1,400 |
9% |
8% |
|
1,401 to 2,000 |
32% |
29% |
|
2,001 to 2,600 |
27% |
25% |
|
2,601 to 3,200 |
12% |
16% |
|
More than 3,200 |
6% |
11% |
Source: Trulia
Nearly three out of four survey respondents (72 percent) said owning a home was part of their personal American dream, up slightly from last fall’s survey, and 78 percent of renters said they hoped to buy a home at some point in the future, Trulia said.
Those prospective first-time buyers may have unrealistic expectations of the amenities available in starter homes, Trulia said. In a survey fielded between June 4-6 that included 2,230 respondents, including 1,486 homebuyers and 693 renters, the top features renters said would make them fall in love with a prospective home were features the vast majority of homeowners said they did not have in their first home. These included an en-suite master bathroom, a walk-in closet, a gourmet kitchen, and an outdoor deck.
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Real Estate Expectations vs. Reality: Hard Pill to Swallow |
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|
|
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Amenity |
Renter Dreams |
First-Time Homeowner Realities |
|
En-suite master bathroom |
62% |
26% |
|
Walk-in closet |
56% |
35% |
|
Gourmet kitchen |
50% |
9% |
|
Outdoor deck |
50% |
28% |
|
Wood floors |
47% |
35% |
|
Pre-wired entertainment system |
31% |
7% |
|
Pool |
24% |
10% |
|
Hot tub |
22% |
6% |
Source: Trulia
"As the economy recovers, people are dreaming bigger, but most won’t realize their dreams anytime soon," Kolko said.
"Few homebuyers — and even fewer first-timers — can afford 3,000 square feet and a gourmet kitchen. Buyers need to take a hard look at what they can actually afford, and give themselves some cushion in case a Euro crisis or federal budget battle pushes us back into recession."