MADISON, NJ - New Jerseyans’ outlook on the housing market has soured, and they are feeling distinctly worse off financially. According to the quarterly consumer survey by Fairleigh Dickinson University’s Silberman College of Business, a majority of New Jerseyans (51%) say they are worse off financially than they were a year ago, a six-point increase since April of this year. About a quarter (26%) say they are about the same as a year ago, and about a quarter (23%) say they are better off.
People who own their house are more likely than renters to say they are worse off financially (53%-42%), and much less likely than renters to say they are better off (19%- 35%). Looking at the year ahead, 38% say their financial well being will improve, while half (49%) think they will be the same or worse off.
One reason for consumers’ grim outlook is housing prices. Half (49%) say they expect housing prices in their area to go down in the next 12 months. That is a huge turnaround from just six months ago when half (49%) said they expected housing prices to rise, and only 30% said they thought housing would decline.
“If your house is a key component of your wealth and it goes down in value with no sign of improvement, you will have a bleak view of your financial future,” said Sorin Tuluca, professor of finance at FDU’s Silberman College of Business.
Moreover, one in five homeowners (19%) say their mortgage is worth more than their house - an increase of five percentage points since April.
“Many homeowners used the equity in their house as an ATM, and this is no longer possible,” said Tuluca. “Renters on the other hand relied mainly on their income and thus their budget was more independent of real estate prices.”
Adding to consumers’ anxiety is the prospect of losing a job: 37% of workers say they are somewhat or very concerned with losing their job in the next 12 months. That figure is up five points from April and up seven points since January. Workers in households making less than $50k per year are most worried about the possibility of losing their job, with 46% saying they are somewhat or very concerned. More than three in five of all adults (63%) continue to report that relatives or friends have lost a job in the past year.
The study also shows most people are concerned with price inflation: 62% are “very” concerned, and 24% are “somewhat” concerned. Just 13% are “a little” or “not concerned” with price inflation.
“Job concerns often dampen consumption and minimize the possibility of inflation—but not always,” added Tuluca. “Inflation is a real risk whenever the Federal Reserve attempts to spur economic growth and employment, and misses the mark.”
The telephone survey of 627 randomly selected adults throughout New Jersey who participate in their household’s financial decisions is sponsored by the Silberman College of Business at Fairleigh Dickinson University. It was conducted by Fairleigh Dickinson University’s PublicMind from Sept. 19 through Sept. 25, 2011, and has a margin of error of +/- 4% percentage points.