More than half of homeowners with a mortgage say they would not walk away from their home if it were underwater — i.e., they owed more than the home was worth — according to the results of a periodic survey by foreclosure data company RealtyTrac and property search site Trulia.com.
Harris Interactive conducted the national survey online between May 10-12. The survey had 2,596 participants: 1,690 homeowners (1,137 of them had a mortgage) and 832 renters. Of those homeowners with a mortgage, 59 percent said they would not walk away from their home regardless of how much they owed on it compared to what it was worth.
The rest would at least consider walking away, but only 1 percent said abandoning the home would be their first choice if they couldn’t pay the mortgage. About 69 percent of homeowners participating in the survey said they would try to get their loan modified first.
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Trulia CEO and co-founder Pete Flint said the government’s Home Affordable Modification Program has had a limited effect on the rate of homes going into foreclosure.
"For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes. It now seems clear that government programs will not reach the overwhelming majority of homeowners in trouble," Flint said.
"Combined with decreased consumer interest around purchasing a foreclosure, it may take even longer than anticipated to see true health return to the real estate market."
The survey results show that while stigma around buying a foreclosure has decreased some year-over-year, it remains high, and interest in actually purchasing a foreclosure has fallen.
The May survey showed that 78 percent of respondents had concerns about buying a foreclosed property, down from 85 percent in May 2009. Of those, 68 percent said they thought there would be hidden costs, 49 percent thought the process was risky, and 35 percent feared the home would lose value.
Among renters, 57 percent said they were at least somewhat likely to buy a foreclosed home in the future, down from 68 percent in May 2009. About 63 percent of renters 18 to 44 were likely to consider such a purchase, compared with 31 percent of those 55 and older. Among homeowners, 40 percent said they would consider buying a foreclosure, down from 49 percent a year ago.
Still, foreclosure purchases made up more than 30 percent of total sales in the first quarter of 2010, said Rick Sharga, senior vice president for RealtyTrac, in a statement.
"We anticipate that there will be an increased number of both REO (bank-owned) purchases and short sales throughout the rest of the year as the most active buying segments — first-time homebuyers and investors — continue to look for bargains," Sharga said.
Almost all consumers (95 percent) expected to get a discount on the price of a foreclosed property compared to that of a similar nonforeclosed home. Expectations varied, however: 36 percent expected to get a discount of 50 percent or more, down from 40 percent in May 2009. At the same time, 18 percent expected a discount of less than 25 percent.
"It appears that potential homebuyers are taking a more realistic view of foreclosure purchasing," Sharga said. "Buying a foreclosure property still provides an opportunity for dramatic savings on a home, but the time and effort involved in executing a short sale, bidding against other buyers for an REO, or the need to do renovations may be issues for buyers not as focused on getting the best price."
About 92 percent of all survey participants said they would be willing to make improvements on a home if it were a foreclosure property, though 65 percent were not willing to invest more than 20 percent of the purchase price to upgrade the property, the survey said.
More than half (62 percent) of respondents who were at least somewhat likely to buy a foreclosed home said they would use it as a primary residence (among renters this figure was 83 percent), while 19 percent would use it for rental income. Among homeowners, 51 percent said they would use the purchase for something other than a primary residence, the survey revealed.
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