From National Realty News

NEW YORK, - Despite the well-documented pullback in the real estate market, consumers' real estate appreciation expectations may still be too optimistic, according to the Second Annual RBC Capital Markets Consumer Survey. Nearly half of all homeowners still expect at least 5 per cent annual increases in their home values over the next few years, but this is down from almost 60 per cent of homeowners last year.

The national survey of 1,003 Americans also revealed that 25 per cent of homeowners have already paid off their mortgage - twice the number of people with risky variable and interest-only mortgages (13 per cent). "While it's true that it may be easier to pay off a mortgage in Selinsgrove, Pennsylvania than it is in NYC, we were still very surprised that the number was so high," said Scot Ciccarelli, managing director and equity research analysts for RBC Capital Markets. "This goes against the general belief that most Americans are leveraged to the hilt."

More than 80 per cent of all homeowners surveyed have at least $50,000 of equity built up in their homes and almost 60 per cent believe they have at least $100,000 of equity in their homes, underlining how much home equity has been built up in the U.S. over the last several years.

However, those who entered the end of the housing cycle with variable rate and interest-only mortgages are clearly at risk once their mortgages renew. Nearly 40 per cent of those with variable rate and interest-only mortgages are concerned with their ability to meet higher payments, while 13 per cent haven't even considered the ramifications. While this is a fairly small segment of the overall survey (approximately 6 per cent), it suggests material risk to this segment of the population.

"While real estate expectations are lower than they were last year, consumers still seem optimistic despite what we are seeing in the marketplace," said Ciccarelli. "Declining real estate values could eventually impact consumer spending as people don't feel as wealthy as they used to and become less likely to borrow against the equity they have built up in their homes."

Ciccarelli also noted that while people have built up substantial home equity over the years, he is very concerned about those people with variable and interest-only mortgages. "Many of them seem ill equipped to handle the higher payments they will eventually incur."

The survey was conducted in September and released today at the RBC Capital Markets Consumer Conference in Orlando, Florida, which is being attended by institutional investors and business executives from across the U.S.

Consumer Spending

Beyond housing, the survey results yielded several other intriguing findings:

"Getting Exactly the Right Product" is far more important to consumers than traditional shopping attributes like brand, convenience and service. More than half (51 per cent) of survey respondents indicated that "price" remains their single biggest focus when they are shopping. However, 35 per cent indicated that "getting the right product" was most important to them, far more than the other three aforementioned attributes.

More importantly, those with the highest incomes favored "getting the right product" over everything else, including price (47 per cent vs. 33 per cent). In addition, those that favored "getting the right product" were also the most avid users of e-commerce, as 38 per cent of this group indicated that they use the Internet more for shopping than they once did compared with just 20 per cent of the "price" driven consumers.

"People usually know what they want and the Internet is great for targeted purchases", said Ciccarelli. "It also seems to play less of a role in searching for the best price for something than we would have thought. These findings underscore the importance for companies to have a strong multi-channel distribution strategy.

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