Homeowner Confidence Out of Whack - But Can you Blame Them?
By: Amy Bohutinsky, Zillow VP of Communications | November 17, 2009
Each quarter we track Homeowner Confidence across the U.S. and more specifically, how homeowners’ perception of their own home’s value compares to reality. We’ve seen a lot of changes in the past six quarters, as homeowners have inched closer to reality by acknowledging widespread home value slides.
However, the third quarter of 2009 is a different story in both market behavior and homeowner perception. As individual markets behaved very differently (some improving, some flat, many still continuing to decline), homeowner perception was literally all over the map. And for the first time, one sector of homeowners — those in the Northeast — was overly cynical about home values. Meanwhile in the hardest-hit region of the country, the Western states, homeowners continued to be overly optimistic when evaluating the value of their own homes.
Nationwide, when asked about their own home’s value over the past year:
• 25% think their home’s value has increased
• 26% think their home’s value has stayed the same
• 49% think their home’s value has decreased
In reality, 72 percent of U.S. homes lost value over the past year, and 22 percent of homes increased in value. That’s fewer homes declining versus Q2(83%), and a smaller Misperception Index of 10 (vs. 13 in Q2 and 17 in Q3 2008). A Misperception Index of zero would mean homeowners’ perceptions were in line with actual values.
Here’s how homeowner perception vs. reality looks across the country:
Meanwhile, when asked about future home values, a trend continued that we’ve seen over the past year — a large number of homeowners thinks their home’s value will increase over the coming six months. Or put another way, the vast majority of homeowners - 84 percent - believes their home has reached a bottom and will not decline any further. Specifically:
• 41% think their home’s value will increase in the next six months
• 43% think their home’s value will stay the same
• 17% of homeowners think their home’s value will decrease
We’ve got a lot of opposing forces in the coming six months that may impact what happens with home values, and it’s getting more and more difficult to predict. On the one hand, increasing foreclosures and, possibly, rising mortgage rates could contribute to further home declines in many parts of the country. Meanwhile, the extended and expanded homebuyer tax credits have the potential to stimulate demand to counteract these declines. Regardless, it seems some homeowners are assuming a V-shaped recovery to home values (i.e. immediate gains in value) versus the L-shaped recovery (i.e. home values staying flat for some time) most economists predict.
Overly optimistic homeowners? Probably. Confused homeowners? Absolutely. And I don’t blame them one bit.
- Stumble it!
- Categories: Real Estate Analytics, Tax Credit Extension
Comments
18 Comments so far
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Top 10 real estate posts of the day for 11/18/2009 : Tempe real esatate and free home search on November 18, 2009 7:20 am
[...] Homeowner confidence out of whack – But can you blame them? – Homeowners are optimistic about the value of their homes over the next six months, and only [...]
Zillow: Homeowners in the West “Continue to be Overly Optimistic” | Seattle Bubble — News & discussion about real estate & the housing bubble in the Seattle area. on November 18, 2009 8:23 am
[...] latest “Homeowner Confidence” survey came out yesterday, and as usual, provides an interesting look into the psychology of the market. …in the hardest-hit region of the country, the Western states, homeowners continued to be [...]
Barry Lynn Miller -REMAX on November 18, 2009 9:56 am
I have mentioned in one of my blogs I feel the tax credit will hurt in short. For those who haven’t been able to sale because they owe to much will use the tax credit to off set their payoff. If too many people do this in one particular area it will bring the overall values down even farther
Craig Blackmon on November 18, 2009 10:12 am
If economists predict an L-shaped recovery (or would that be “recovery”) of housing prices, then we’re in for a long period of minimal equity in many homes. Under those circumstances, perhaps sellers will realize that they may be best served by finding an alternative service model for selling their property that incurs far less in transactional costs. Similarly, buyers can hedge against further depreciation by reducing their own out-of-pocket transaction costs. There are service models available where buyers get a rebate of the entire buyer’s agent commission, typically 3% of the purchase price. That provides a 3% cushion right out of the gate against any further loss in value from the taxable/”official” sale price.
La Jolla Realtor on November 18, 2009 11:55 am
I think you are clearly exaggerating this story. Here’s what you stated:
25% think home value increased
22% of home values did increase
26% think home value is same
6% of homes values are the same
49% think home value decreased
72% of home values decreased
Statistically, it’s almost impossible for a home value to stay the exact same for a whole year. On your survey you are giving 3 different options to choose from: increase, stay same, or decrease.
Clearly you are going to get skewed results on a survey like this. If you were to give them more choices, I’m sure that the results would not have been “Out of Whack.”
concorsi musicali on November 18, 2009 2:55 pm
Thanks for sharing information and i appreciate it.Looking for more discussion and waiting for new topics here.
DebtFree on November 19, 2009 12:46 pm
re: “Statistically, it’s almost impossible for a home value to stay the exact same for a whole year”
On what information do you base this claim? The prices of ANY asset can increase, decline, or stagnate — housing is no different.
is this news or self serving crap? on November 19, 2009 1:28 pm
Lots of self-promotion and no valid advice on this website. Zillow is part of the problem, folks.
Kevin Benner on November 19, 2009 1:39 pm
As a contrarian in practice I think that we may not have seen the bottom just yet. A lot will depend on where the unemployment rate bottoms out at. If we get 12%+ I just don’t see anything but a wave of homeowners defaulting or at the least falling behind on their payments.
Josie Sarullo on November 19, 2009 1:44 pm
I just ran a search of homes over 3 bedrooms, under 875,000, in Carmel Valley that SOLD within the last 30 days of today 11-19-09 and FIVE out of 15 were sold ABOVE asking price.
Those are FACTS
Debbie Summers on November 19, 2009 1:52 pm
In Central Florida 66% of the homes that are selling are distressed properties, until we see a “healthier” mix of traditional sellers, we will continue to see a negative effect on home values - Only time will tell.
In the mid 90’s we saw several years with little or no increase in home values, I can only hope that we get to that point in the Orlando area in the next 12 to 24 months.
None on November 19, 2009 6:33 pm
Assumption is that homeowner’s “know the accurate value” of their home in the first place.
Example: “In reality” 72% of homes lost value. Perhaps homeowner didn’t know that home was $450M and declined to $400M. If buyer thinks value is $350M (what he bought it for 5 years ago) - then assumption that homeowner is overly optimistic is flawed.
Las Vegas Real Estate Agent on November 19, 2009 7:15 pm
Even the pros are confused with all of the market tampering forces in play… Tax Credits, Fannie Mae getting in the landlord business, the Fed being pretty much the only buyer of mortgage backed securities, temporary loan mods, shadow inventory, etc, etc…
I would think a W shaped recovery is the most likely scenario after the tax credit ends and the Fed backs off of buying up the Mortgage backed securities (higher interest rates)…
But.. who really knows what is going to happen or the next program that is going to come along?
Carol Taylor on November 20, 2009 12:08 pm
In NJ the pricing decline/increase depends on how close your location is to NYC. As you go from west to east, the prices have been holding or have declined at a much slower rate than homes that are located, say, 10 or more miles from a major highway that goes towards the NY area. In towns such as Morris Plains, Chathem, and Madison multiple offers are being experienced. The towns located along these major corridors are also where NJ top employing companies are located. With the price of homes being more affordable further east, the necessity to go west isn’t as critical as it was 3 years ago.
kentucky on November 20, 2009 12:47 pm
As a realtor working in a large city, i find Zillow unreli
able. Very few of it’s value quotes are within 20%. They are part of the problem, feeding incorrect data to an uninformed public.
PATTY J ARRERApatt on November 22, 2009 8:45 am
I a m a real estate agent and have a listing
on your site. The address is 31218 354rh ST SE
in Enumclaw, Wa. The sq. footage that you list
is incorrect. You list 910 and the actual sq.
footage is 1530, because there is a partly
finished basement of 600+ SQ FT. Is it possible to correct this? Thank You,
Carnival of Real Estate #167 « Hawaii Real Estate Blog on November 23, 2009 1:33 pm
[...] Homeowner Confidence Out of Whack - But Can you Blame Them? Amy Bohutinsky of Zillow.com Very interesting article that teaches us how, “homeowners’ perception of their own home’s value compares to reality.” [...]
Hawaii Real Estate Agent on December 9, 2009 10:18 pm
I would have to say the majority of agents are in denial as well. Every time I see an agent post on their blog how things are getting better, I know why the homeowners are confused.
As of November 2009, median prices for single family homes are down, to $580,000. Condominium prices are down to $302,750. We are still on the way down.