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Nearly One in Five Recent Homebuyers Purchased a Home That Exceeded Their Price Range, According to a New Wall Street Journal Online/Harris Interactive Personal Finance Poll

Posted on: Friday, 16 September 2005, 15:00 CDT

ROCHESTER, N.Y., Sept. 16 /PRNewswire/ -- A new Wall Street Journal Online/Harris Interactive Personal Finance Poll finds that nearly one in five (19%) U.S. adults who purchased a home within the last three years for their primary residence say they spent above their suggested price range, while two- thirds (67%) stayed within their price range and 12% were below their price range. When obtaining a mortgage for their new home, recent homebuyers who used a mortgage broker, direct lender or another source were nearly three times more likely to obtain a fixed-rate mortgage (72%) than an adjustable- rate mortgage (26%), and fully a third (34%) opted for a creative or option mortgage.

Below are the results of the online survey of 2,300 U.S. adults conducted between Aug. 19 and 23, 2005, for The Wall Street Journal Online's Personal Journal Edition.

With the skyrocketing price of real estate in the western part of the U.S., it's not surprising to find that those who bought homes in the West within the last three years are more likely to have gone above their suggested price range when purchasing their home (29%) than those in the Northeast(1) (8%), Midwest (12%) or South (22%). Furthermore, those in the Northeast (83%) and Midwest (80%) are more likely to have stayed within their price range when purchasing their home than those in the South (57%) or West (56%).

Mortgage brokers versus direct lenders

When looking to obtain a mortgage, homebuyers must decide through whom they want to work. According to the survey, mortgage brokers (39%) edge out direct lenders (32%) as the primary source of mortgage providers for recent homebuyers. Less than one in 10 (8%) used another source to obtain a mortgage, while 14% say they did not need a mortgage to purchase their home. Interestingly, younger homebuyers (age 18 to 34) are most likely to have chosen a broker (55%) while homebuyers age 35 to 42 are most likely to have obtained their mortgage through a direct lender (42%).

Creative or option mortgages

In addition to a traditional mortgage, homebuyers also have the option to choose a creative or option mortgage.

"Nontraditional methods of funding a primary residence are becoming more commonplace and acceptable, especially in areas of the country that have seen housing prices skyrocket," said Anne Aldrich, senior vice president of the Financial Services Research Practice at Harris Interactive(R). "It is important that consumers be aware of all of the options available to them, as well as the possible risks that they may take on with 'creative' mortgage options."

A little more than one-third (34%) of recent homebuyers who obtained their mortgage through a broker, direct lender or someone else chose one of the following four creative or option mortgages:

- An interest-only mortgage -- where borrowers pay interest but no principal in the early years of the loan (17%). - A piggyback mortgage -- where the loan combines a standard first mortgage with a home-equity loan or line of credit to avoid private mortgage insurance or the higher interest rates on jumbo loans (10%). - A payment option mortgage -- where borrowers have four payment options each month and those who elect to make the minimum payment could actually see their loan balance rise rather than fall (4%). - A miss-a-payment mortgage -- where borrowers are allowed to skip up to two mortgage payments a year and up to 10 payments over the life of the loan without ruining their credit rating (2%). (1) Small base. Data should be used directionally. TABLE 1 RECENT HOME PURCHASE

"Have you purchased a home that you've used as your primary residence within

the past three years?" Base: All Adults % Yes 17 No 81 Don't know 1 Decline to answer 1 TABLE 2 HOME PURCHASE PRICE RANGE "Was the home you purchased within your suggested price range, above this

price range, or below this price range? If you have purchased more than one

home that you have used as your primary residence in the past three years please think only of the home you most recently purchased." Base: Purchased a home as primary residence within past three years Region Total Northeast Midwest South West (n=444) (n=80)** (n=102) (n=159) (n=103) % % % % % Within my price range 67 83 80 57 56 Above my price range 19 8 12 22 29 Below my price range 12 8 7 16 13 Don't know 2 -- 1 5 2 Decline to answer * -- -- -- * Note: Percentages may not add up to 100% due to rounding. * Less than 0.5%. ** Small base. Data should be used directionally. TABLE 3 HOW MORTGAGE WAS OBTAINED "Through which of the following did you obtain your mortgage?" Base: Purchased a home as primary residence within past three years Age Total 18-34 35-44 45-54 55+ (n=444) (n=171) (n=112) (n=77)* (n=84)* % % % % % Obtained mortgage through broker, lender or someone else 79 92 88 73 48 (NET) Mortgage broker 39 55 39 30 19 Direct lender 32 32 42 30 17 Someone else 8 4 6 12 12 I did not need a mortgage 14 4 2 17 44 Don't know 5 3 7 6 7 Decline to answer 2 1 2 3 1 Note: Percentages may not add up to 100% due to rounding. * Small base. Data should be used directionally. TABLE 4 EASE OF MORTGAGE PROCESS "How difficult or easy was the process of obtaining a mortgage for you?" Base: Obtained a mortgage through mortgage broker, direct lender or someone else Total (n=370) % EASY (NET) 81 Very easy 45 Somewhat easy 35 DIFFICULT (NET) 18 Somewhat difficult 13 Very difficult 5 Don't know, I was not involved in the process 1 Note: Percentages may not add up to 100% due to rounding. TABLE 5 TYPE OF MORTGAGE OBTAINED "Was the mortgage you obtained a fixed or an adjustable rate?" Base: Obtained a mortgage through mortgage broker, direct lender or someone else Region Total Northeast Midwest South West (n=370) (n=69)** (n=90)** (n=128) (n=83) % % % % % Fixed rate 72 85 70 74 62 Adjustable rate 26 14 25 26 38 Don't know 1 -- 5 * -- Decline to answer * 1 -- -- 1 Note: Percentages may not add up to 100% due to rounding. * Less than 0.5%. ** Small base. Data should be used directionally. TABLE 6

CREATIVE MORTGAGE OPTIONS "Which of the following types of creative or option mortgages, if any, do you

have? Please select all that apply." Base: Obtained a mortgage through mortgage broker, direct lender or someone else Region Total Northeast Midwest South West (n=370) (n=69)* (n=90)* (n=128) (n=83)* % % % % % Interest-only mortgages. 17 13 15 12 30 Borrowers pay interest but no principal in the early years of the loan. Piggyback mortgages. 10 15 10 9 6 Loans that combine a standard first mortgage with a home-equity loan or line of credit to avoid private mortgage insurance or the higher interest rates on jumbo loans. Payment option mortgages. 4 7 9 3 -- Borrowers have four payment options each month. Borrowers who elect to make the minimum payment could actually see their loan balance rise rather than fall. Miss-a-payment mortgages. 2 5 2 2 1 Lets borrowers skip up to two mortgage payments a year and up to 10 payments over the life of the loan without ruining their credit rating. Don't know 46 41 44 50 45 Decline to answer 24 29 20 27 22 Note: Multiple-response question. * Small base. Data should be used directionally. Downloadable PDFs of The Wall Street Journal Online/Harris Interactive Personal Finance Polls are posted at http://www.harrisinteractive.com/news/newsletters_wsjfinance.asp. Methodology

Harris Interactive(R) conducted this online survey within the United States between Aug. 19 and 23, 2005 among a national cross section of 2,300 adults, ages 18 years and over. Figures for age, gender, race/ethnicity, education, income and region were weighted where necessary to align with population proportions. Propensity score weighting was also used to adjust for respondents' propensity to be online.

In theory, with probability samples of this size, one can say with 95% certainty that the overall results have a sampling error of plus or minus 3 percentage points of what they would be if the entire U.S. adult population had been polled with complete accuracy. Sampling error for the sub-samples listed in the tables is higher and varies. Unfortunately, there are several other possible sources of error in polls or surveys that are probably more serious than theoretical calculations of sampling error. This includes refusals to be interviewed (nonresponse), question wording and question order, and weighting. It is impossible to quantify the errors that may result from these factors. This online sample is not a probability sample.

These statements conform to the principles of disclosure of the National Council on Public Polls.

About the Survey

The Wall Street Journal Online/Harris Interactive Personal Finance Poll is an exclusive poll that is published in the Personal Journal Edition of The Wall Street Journal Online at http://www.wsj.com/personaljournal.

About The Wall Street Journal Online

The Wall Street Journal Online at WSJ.com, published by Dow Jones & Company (NYSE: DJ; http://www.dowjones.com/), is the largest paid subscription news site on the Web. Launched in 1996, the Online Journal continues to attract quality subscribers that are at the top of their industries, with 744,000 subscribers world-wide as of Q2, 2005.

The Online Journal provides in-depth business news and financial information 24 hours a day, seven days a week, with insight and analysis, including breaking business and technology news and analysis from around the world. It draws on the Dow Jones network of nearly 1,800 business and financial news staff-the largest network of business and financial journalists in the world. The Online Journal also features exclusive content, including interactive graphics on business and world news, and online-only columns about the automotive industry, technology, personal finance and more.

The Online Journal offers two industry-specific editions: the award- winning Health Industry Edition and the Media & Marketing Edition. The Health Industry Edition offers authoritative analysis, breaking news and commentary from top industry journalists. The Media & Marketing Edition is designed for professionals in the advertising, marketing, entertainment and media industries. Subscribers to both online editions also get access to the full content of the Online Journal.

In 2005, the Online Journal was awarded a Codie Award for Best Online News Service for the second consecutive year, and its Health Industry Edition was awarded Best Online Science or Technology Service for the third consecutive year. In 2004, the Online Journal received an EPpy Award for Best Internet Business Service over 1 million monthly visitors.

The Wall Street Journal Online network includes CareerJournal.com, OpinionJournal.com, StartupJournal.com, RealEstateJournal.com and CollegeJournal.com.

About Harris Interactive(R)

Harris Interactive Inc. (http://www.harrisinteractive.com/) is the 13th largest and fastest-growing market research firm in the world, perhaps best known for The Harris Poll(R) and for pioneering and engineering Internet-based research methods. The Rochester, New York-based global research company blends premier strategic consulting with innovative and efficient methods of investigation, analysis and application, conducting proprietary and public research globally to help clients achieve clear, material and enduring results.

Blending science and art, Harris Interactive combines its intellectual capital and one of the world's largest online panels of respondents, with premier Internet survey technology and sophisticated research methods to market leadership through its US, Europe (http://www.harrisinteractive.com/europe) and Asia offices, its wholly owned subsidiary, Novatris in Paris (http://www.novatris.com/), and through an independent global network of affiliate market research companies. EOE M/F/D/V

To become a member of the Harris Poll Online(SM) and be invited to participate in future online surveys, go to http://www.harrispollonline.com/.

Press Contacts: Robert Christie Dow Jones & Company 212-416-2636 Nancy Wong Harris Interactive 585-214-7316 Kelly Gullo Harris Interactive 585-214-7172

Harris Interactive

CONTACT: Robert Christie of Dow Jones & Company, +1-212-416-2636; NancyWong, +1-585-214-7316, or Kelly Gullo +1-585-214-7172, both of HarrisInteractive

Web site: http://www.harrisinteractive.com/http://www.dowjones.com/http://www.harrispollonline.com/http://www.harrisinteractive.com/europehttp://www.novatris.com/

Source: PRNewswire

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