Two out of three Americans expect home prices to stay the same or drop in the next year, according to a Reuters/Zogby poll released on Wednesday that suggests the battered housing market has further to fall.
However, the economic mood was somewhat more upbeat than it had been a month earlier, possibly reflecting recent record highs on Wall Street and the Federal Reserve's decision on September 18 to lower its benchmark interest rate.
Thirty-one percent of those polled in the monthly survey expect a U.S. recession in the next year, a tad less pessimistic than the prior month's reading of 33 percent.
The survey of 991 likely voters was conducted October 10-14, just as the Dow Jones industrial average and Standard & Poor's 500 were hitting new highs. The previous month's poll was taken shortly before U.S. interest rates were lowered.
Pollster John Zogby said the results show that Americans were a bit less fearful of an imminent economic crisis than they were last month, perhaps because there had been no fresh disasters to harden recession fears.
"There's still mid- to long-term concern, but on the other hand, the Fed's (interest rate) action at least suggests that the immediate crisis -- going to hell in a handbasket quickly -- may have abated," Zogby said. "It's not disastrous, but a significant number of people are downbeat."
Of those polled, 30 percent said they expect home prices in their area to stay about the same in the next year, while 31 percent thought they would drop a little. Slightly more than 7 percent thought home prices would drop a lot.
When the same question was asked a month ago, a similar percentage thought prices would stay about the same, while 35.5 percent predicted they would fall a little and 8.5 percent expected a large drop.
Broken down by geographic region, attitudes were much more somber in the West, where states such as California and Nevada have been hard hit by the housing downturn. Less than a quarter of those surveyed in the West expect home prices in the region to rise.
The South was the most upbeat, with nearly 30 percent expecting home prices to increase in the next year.
Economists have been keeping a particularly close eye on the slumping housing market for signs that it is prompting consumers to cut back on spending.
Many homeowners took out home equity loans during the five-year housing boom that peaked in 2005, and some of that cash helped fuel a consumer spending spree that has kept a U.S. expansion on track since the end of 2001. If consumers cut back sharply, it could trigger a recession.