Homeowners Call a Bottom: Optimism or Delusion?
By: Amy Bohutinsky, Zillow VP of Communications | February 10, 2009
Today we’re releasing the results of our Q4 Homeowner Confidence Survey, and as in prior quarters — the results are raising eyebrows. But this time, it’s not so much that homeowners don’t think the housing slide has affected them — for the first time, they do. Ten quarters, or 2.5 years, since U.S. home values peaked, homeowners largely now “get it” when it comes to their own home losing value.
What’s surprising is that this sentiment doesn’t extend to the future. In fact, most U.S. homeowners don’t think home values will fall further. By the numbers…
More than half of homeowners acknowledge that their own home’s value has declined over the past year:
- 57% think their home’s value has decreased
- 18% think their home’s value has stayed the same
- 25% think their home’s value has increased
In reality, three-quarters (76%) of U.S. homes lost value in 2008, according to analysis of Zillow’s Q4 Real Estate Market Reports. This narrowing of the misperception gap brings Zillow’s Home Value Misperception Index to 10, down from 16 in the third quarter and 32 in the second quarter. An index of zero would mean homeowners’ perceptions were in line with actual values.
However when asked about the future, homeowners are going where no economist dares to tread today — they’re calling a bottom. Fully 70 percent predict their home’s value will either increase or stay the same in the first six months of 2009. Specifically:
- 30% of homeowners think their home’s value will decrease
- 43% think their home’s value will stay the same
- 27% think their home’s value will increase
Looking below at this measure over the last couple of quarters, you can see that homeowners became more optimistic at the end of the year.
What do we make of this? At a time when depressing economic news is everywhere we turn, maybe it’s a sentiment that “it can’t get any worse,” or “we can’t fall any further.” Certainly for a generation that has yet to live through a prolonged recession, the idea that home values may continue to fall, or may not improve significantly for years to come, is unfathomable.
Or, perhaps this idea of buyers waiting on the sidelines that’s been discussed here recently is having a real impact. Talk of government intervention, such as the proposed $15,000 tax credit for buyers, could be changing the way people think.
Regardless of the why, it’s a perplexing window into the psyche of the American homeowner. Now tell me what you think…
- Stumble it!
- Categories: Real Estate Analytics, Real Estate Industry
Comments
38 Comments so far
Enjoy this post? Subscribe to the Zillow Blog feed or get updates via e-mail
Jo on February 10, 2009 9:23 pm
Looking for a new home on Chicago’s north shore. Been noticing a lot of price drops recently as people who have not sold last fall want to get out of the market before the spring homes list. I realize these neighborhoods carry a price premium, but even so the price drops are not enough to make me interested, I’d rather wait to see what the spring holds. In general, I find the prices here pretty ridiculous, these older homes were not designed for a modern lifestyle when it comes to room size, closets, EIKs, etc, but it’s all about location, location, location.
John Gallagher on February 10, 2009 9:50 pm
I believe that if the $15,000 tax credit becomes a reality (It still has to be synchronized with the House bill), it will trigger some buyers in the market. The question is, why do they cap it at $15,000? Other items I think still need to occur are a lifting of the Jumbo limits in some areas. Having only two numbers $417,000 and $700+ are not enough. There needs to be a sliding scale.
We shall see!
Jennifer on February 10, 2009 9:57 pm
Optimism or Delusion?
Delusion. Or Denial.
See:
graphics.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
And:
cbsnews.com/video/watch/?id=4668112n
Home prices inflated due to exotic financing and general mania among buyers.
The exotic financing is gone, as are the lenders who provided it (Countrywide, Washington Mutual, Lehman Brothers, Bear Stearns, Merrill Lynch, etc). All gone. The Alt-A mortgages begin resetting in 2009.
The mania is gone too. Gone are the cocktail party discussions ranting about soaring home “equity” — replaced with somber faces, layoffs, negative equity, and foreclosures.
Jennifer on February 10, 2009 9:59 pm
Above NY Times URL was too long, here’s a shorter version to the same chart:
tinyurl.com/HomePricesFor100Years
Lots more pain on the way in 2009, 2010, and 2011.
zillow.com Releases Homeowner Confidence Survey | Property Portal Watch on February 10, 2009 11:31 pm
[...] Confidence Survey, and the results are interestingly optimistic. Writing on the company’s blog, Amy Bohutinsky, zillow.com’s VP, Communications, said that two and a half years after house [...]
David on February 11, 2009 6:08 am
As a r.e. broker/owner of a small firm in Sarasota, FLorida, it might be wise to keep in mind an old “rule of thumb” when trying to guage a forecast of the future in real estate demand. Remember that for every 2 jobs lost or gained, it translates into one (1) housing unit. With approx. 3.8 million job losses and more to come, I don’t see demand picking up. There are only so many buyers that can fill the gap, especially with the lack of money supply and frozen credit markets. It will be a couple years in my opinion before we see enough demand to “turn the tide”.
Rich on February 11, 2009 6:58 am
Common sense rules. The economy is still going down, jobless claims is increasing, and businesses are cutting/closing. Therefore house prices will continue to go down.
Most sellers are still hoping that the stimulus package will save them, and therefore still sell/list their homes at high prices. Real estate brokers still want large profits( most of them). When buyers like myself go to the bank with excellent credit, the bank tells us that even though our credit is good the house is not appraised for that value, and will NOT give a loan, unless the buyer is willing to fork up the differences .Buyers are not going to do this when their stocks, 401K, and other investments are losing big time every posting. This is one of the major reasons why home buying is becoming difficult. The buyers are there, but the prices are still inflated, and banks are not giving inflated loans like before. Sellers need to be realistic and brokers need to cut their margins.
oldnavajo on February 11, 2009 8:30 am
I can give you an example of rising prices in one specific neighborhood in the Ojai Valley in Calif. In the 4th quarter (Nov.) a house sold for a $120k less than the zestimate. Here in the 1st quarter of 09 (Jan) another house sold for $10k more than the zestimate. The next house up will close on the 22nd of Feb. for $16k more than the zestimate. There is one remaining house left in the neighborhood and the bank has it priced $50k over the zestimate. These were all foreclosures except one. Do foreclosure buyers think this period (early ‘09) is a bottom ? From these sales I’d conclude that they do for this neighborhood. I personally know these buyers and with the exception of one they are all strong hands.
J1mbo01 on February 11, 2009 9:28 am
oldnavajo: You are basing your numbers on a Zestimate and not actual sales prices. Unless you have the previous sales prices for those homes you cannot say that prices are rising. For all we know those homes could be selling for 300,000 less than their “Zestimate” was in 2005 or 2006. If you said that the houses sold were 15,000 dollars above the sale price in 2005 then you would have a valid argument. The zillow estimate is just that, an estimate. I have seen houses sell for 200k over the zestimate as well as 200k under the zestimate. It is a helpful tool, but you shouldn’t compare sale prices to a “zestimate.”
The Real Estate Crack Up | It's all fun and games until someone loses a home on February 11, 2009 10:22 am
[...] at Zillow, they’ve just released the results of the latest Homeowner Confidence Survey, and [...]
BigDragon on February 11, 2009 11:38 am
Sellers are definitely delusional in most regions. The same thing goes for realtors and brokers.
Anyone who thinks the $15k tax credit will help is contributing to the real estate problem. This kind of short-term thinking is what got us into this mess. That tax credit has to be repaid. It’s nothing more than a shuffling of money into a later repayment obligation. Lower mortgage rates are nice, but they keep prices high and are coming with some astronomical fees.
I’m looking to buy in the Maryland suburbs, but most sellers have this fantasy mindset that government jobs and the BRAC will inflate real estate values. People all-to-quickly forget about the median household income, credit market, and historical norms. Buyers are smart to continue waiting out the market in the regions that still haven’t figured out the real estate bubble popped. With mounting job losses and swelling budget-deficits, it’s clear calling a bottom is nothing more than wishful thinking or clever data manipulation at this point.
db on February 11, 2009 12:02 pm
The 15000 tax credit has just been wiped out by senate negotiations. Sorry. The old 7500 credit will at least be in place, however it may still have to be repayed. Lots of people are going to be upset with this.
AV on February 11, 2009 1:49 pm
This credit is unfair to those who have just recently purchased homes in these turbulent times or any time. It should be retroactive at least, and should not occur at all. People should not be upset because it would have been a gift. Americans counting on handouts and bailouts are a large part of what put us in the situation we are in. This will encourage homebuying, hopefully mortgage lenders will be responsible about giving loans to people, and people will not bite off more than they can chew. This is a short term solution that has the huge potential to be a long term burden.
J1mbo01 on February 11, 2009 2:31 pm
Agreed: These handouts, credits, easy money, etc. should be done away with. What we need is for home prices to come down to an “affordable” rate and for people who shouldn’t own a home to get out of the market via foreclosure. Low home prices are a good thing; but the media (which is controlled by baby boomers; the ones who want values to be high) is saying that low home prices are a bad thing. However for the future residents and leaders of this country (the under 30 crowd who hasn’t bought yet) low home prices are the best thing that is happening right now. This economy needs to be cleansed of all of the fake wealth and bad business that got us into this situation.
Mortgage News on February 11, 2009 2:37 pm
Home values are destined to continue their decline as a second wave of foreclosures from option arms and alt a loans hits the U.S. housing market.
Kal on February 11, 2009 3:39 pm
With a continuing increase in unemployment and no marked sign of a financial turnaround, foreclosures will continue the current trend. But don’t forget, for all those who had overpaid and over borrowed for their home, fueling the bubble, there are a lot of people who sold at the high and are sitting on a lot of cash. The same goes for the stock market. When a bubble bursts, prices simply return to where they should have been. That should not be confused with a normal downturn due to the deterioration of the general economy. Although, that may trigger the bursting of an existing bubble. At this point, it may be less important to call the bottom than to realize that even if the economy recovers and home prices stop falling, it will be a slow climb afterward if we’d learned our lesson. It’s just too bad for the people who overpaid in the bubble. But they are also at fault for helping to fuel the bubble at the time. People are never forced to own homes; they can always rent.
No $15,000 Tax Credit For YOU! — Burbtimes on February 11, 2009 3:41 pm
[...] many are fixated on the elusive 4% or 4.5%. Many are “waiting for the bottom” and some have even called it. We have been lucky in that this cycle had come to the towns along the midtown direct in the last 6 [...]
Julie Chu on February 11, 2009 4:21 pm
I agree with J1mbo01. Handouts, easy $… my goodness! Do away with them and let Americans understand and learn from their mistakes. The exotic loans that were offered by lenders have been blamed for the misfortune of many recent homeowners. But we have failed to recognize that it takes two to tangle. Those that bought at the height of the housing market should have known that they couldn’t afford to purchase their over inflated house to begin with. What’s happening now are the consequences of their actions, and they need to deal with reality. People who shouldn’t own a home should get out of the market via foreclosure. Know what you’re getting into and take responsibility for your actions.
oldnavajo on February 11, 2009 4:43 pm
Jimbo01. You don’t read to well do you. The question was is a bottoming forming. Of course these houses are selling for 100’s of thousands less than they did at the peak in ‘05 and ‘06. Nobody said they were selling for more. I’m telling you that this neighborhood has bottomed and is rising from the bottom. I’m using zillows zestimates and sale price per square footage. You can shoot your mouth off like you know what your talking about but go pick on somebody else. These homes are being purchased by experienced multi millionaire realestate investors who in addition to buying them they are planning on spending an additional 100k+ on upgrading them. So unless your a bigger millionaire than them I suggest you keep your line of BS to yourself.
Julie Chu on February 11, 2009 5:42 pm
ouch oldnavajo! To address the ques. on bottoming out. Overall, no we haven’t hit rock bottom yet. There’s still room to drop cuz unemployment is on the rise and people are desperate to hold onto their homes. However, they know very well that sooner or later they will have to sell their house way under what they had paid for. I’ve been observing the market very closely to find the right opportunity to buy for several years now. What I’ve notice is the increase in short sales and foreclosures in the last 1/2 yr. The majority of current listings I’m getting are just that! I’m talking about homes in middle class suburbs, majority (70-80%) w/ BA degrees, and an average income of 80-90K. Some homes went back on the market twice in the last 1 1/2yr. and there were big price reductions,btwn 100-200K!
Maybe your millionaire friends know something about bottoming out than your average joe and that’s why they’re buying now and fixing them up. Maybe they know which areas will retain their value . For me, I predict that the market will cont. to fall til the end of 09 or 2010, or even longer.
I feel terrible for those who will loose their homes, but all hopes of their house valued at the time of purchase is long gone…
Homeowner Confidence by Region | Zillow® Blog on February 11, 2009 6:12 pm
[...] Earlier I reported on the always-surprising findings of our quarterly Homeowner Confidence Survey, which polls 1500+ U.S. homeowners about their perception of their own home’s value. Results show most homeowners are no longer in denial about whether their homes lost value in 2008 — 57 percent of U.S. homeowners say their home’s value declined over the past year, when in fact three-quarters (76%) of U.S. homes lost value. That’s a lot closer perception-reality gap than in July 2008, when only 38 percent of homeowners thought their home values had declined. [...]
Jennifer on February 11, 2009 9:21 pm
oldnavajo writes: “In the 4th quarter (Nov.) a house sold for a $120k less than the zestimate. Here in the 1st quarter of 09 (Jan) another house sold for $10k more than the zestimate.”
Zestimates don’t mean much in determining market conditions. They are a theoretical estimate. You need to look at actual home sale transactions.
People are selling for losses, sometimes large losses, in the premium towns in my area.
Jennifer on February 11, 2009 9:26 pm
RE: “I’m telling you that this neighborhood has bottomed and is rising from the bottom.”
Which zip code? Post some transaction data to support your claims.
How can anything “bottom” when each month the layoffs mount, people’s financial portfolios are decimated, and the government is flying blind?
oldnavajo on February 12, 2009 11:32 am
Jennifer, this is not a claim it is a fact. Sorry I’m not going to give you a zip I have nothing to prove. Besides the sales are so new and some still in escrow that Zillow and the other services won’t even pick up the data for another 30 to 45 days. Even if I did give you a zip, the zip is to big and covers to much area.
Jennifer, I’m not saying that a bottom is in place everywhere. Only in this specific neighborhood. It has some very unique qualities which I’m not going to get into. This is my 4th realestate recession and this one appears to be playing out like the other 3 before it. The only thing that appears to be different is that the media and the government seem to be making it out to be bigger than what it is. Personally I think things were much worse back in the ‘80-’82 recession.
DebtFree on February 12, 2009 11:39 am
RE: “this is not a claim it is a fact. Sorry I’m not going to give you a zip I have nothing to prove.”
It’s definitely not a “fact” because you say so. Provide some evidence. If you cannot illustrate that your claims to be true, they are meaningless.
J1mbo01 on February 12, 2009 11:49 am
This is an example of a real estate fact: A home in Lexington Massachusetts, which is an upscale town considered to be “immune” from the real estate bubble in REALTOR circles around here, had a selling price in 1999 of 390,000. It sold last week for 450,000. That is not even keeping pace with inflation. The seller made no gain and technically lost money. That is a fact. Inflation adjusted that home should be selling for 497,000 today, and no, it was not a foreclosure or short sale.
The only way to find the bottom is when it has come and gone…….a fact repeated in history time and time again.
Cirios Real Estate » Blog Archive » Keepin’ It Real Estate: How Good is Zillow? » Residential Property Evaluations on February 13, 2009 11:37 am
[...] study released this week by Zillow, a real estate information website best known for its wildly inaccurate estimates of property [...]
Zillow.com Reports - Has Housing Bottomed? Consumers Think “YES” on February 15, 2009 4:25 pm
[...] Homeowners Call a Bottom: Optimism or Delusion? [...]
Sacramento Real Estate Voice on February 17, 2009 12:42 pm
Mardi Gras Carnival of Real Estate in Sacramento…
Welcome to the February 16th 2009 edition of the Carnival of Real Estate.
Sacramento Real Estate Voice has the honor of hosting and serving as Queen of the Carnival of Real Estate (CORE) #129 where bloggers from around the world submit their best en…
Sherrill Ellis on February 17, 2009 8:36 pm
I think it’s hard for ANYONE to predict what our future holds whether it be good, bad or indifferent. Listening to the media and reading print copy reports lean toward the negitive. Whatever the truth or results ~ time will tell. In the meantime, forge ahead!
Billyberu on February 18, 2009 6:13 am
The housing market can either be an appreciating market or a depreciating market. Right now we are in a depreciating market. Seller’s need to stop treating their house like a product and treat it like a commodity, which it is. Until inventory levels go down, prices will continue to drop. The current inventory levels will take over a year to get rid of. We have not come to the bottoming out of the real estate market. Unfortunately, it is going to get worse. If sellers want to overprice their home, it will sit on the market for a very long time.
Marcie Lanz on February 18, 2009 9:03 am
Hooray Sherrill!! The market is what it is today. The market will be what it will be tomorrow. Unless you are a true psychic I believe all these predictions are just simple theories and a theory can never be wrong. I am a realtor in Dandridge Tn, foothills of the Great Smoky Mountains. Our values have declined a little. Maybe they’ll drop more, maybe they’ll level out. Personally, I am and will continue to think positive, live for today and “full speed ahead”. Don’t get me wrong, I’m not an ostrich with my head in the ground but I believe we can pull out of this recession by concentrating on here and now. A co-worker of mine said the other day, “We’ll fix this recession one house at a time”. Owning a home is an investment but it is also an “American Dream”. As for the tax credit: It is now signed into law, is for first time home buyers (definition-someone who has not owned a home in the past 3 years), is 10% of purchase price or $8,000. whichever is less and does not have to be repaid unless the home is sold within 3 years of the purchase date. I agree it’s not fair to the folks that purchased in 2008 and has to repay the $7,500. credit but life in general is not fair. We have to roll with the punches.
Mike on February 18, 2009 11:46 am
A few things. First, that chart Jennifer posted on Feb 10 doesn’t make sense to me. Maybe I am dumb, but it appears by it that home prices in roughly 1895 were the same 105 years later in 2000. Help educate me if I am reading it wrong.
Second, an observation: in Orange County, CA, the number of sales for all of 2008 (24,527) were 19% greater than 2007. Also, in Jan. ‘09 sales were 68% greater than Jan. ‘08. Additionally, inventory of available homes for sale has decreased 36% from its high in 2007. Finally, prices year over year are still much lower but: 1) the rate of decrease has been flattening, and; 2) there were actually three months in 2008 where sales prices rose compared to the previous month.
Now, a feeling. I’ve been following the real estate market since 1985. To me the market today feels just like where we were in 1996-1997. That’s when housing sales began their recovery from that recession. Inventory dropped, sales increased and prices then began their long climb upward. We still had a financial mess then and we were recovering from the S&L bailout and all those problems that brought. Again, just a gut feeling but I do believe we are bumping along the bottom. Will the “official” price recovery be March? April? May? All I can say is that we are very close.
Here’s a thought: whether you think I’m an idiot or a genius, save the url of this thread and come back to it in, say, July. If it turns out I am an idiot, make a comment then and let me know. I will humbly acknowledge it. If it turns out I am a genius, comment on that too.
Thanks for reading.
Hannah Williams on February 20, 2009 6:44 pm
I wish I had a magic wand..but I do not.People are losing their jobs,economy is not on the rise.I do not see home values rising.There are forclosures and many mortgage modifications in the works.Lenders are making it more difficult for buyer’s to get loans.The $8,000 first buyer tax credit may help those who have been sitting on the fence make a move.
These are just some facts .We just have to sit back and see what happens.
Marcie Lanz on February 21, 2009 6:12 am
I believe the market will pick up this year. What we need to do is be a team member. The government has given us a boost but the bottom line is it is up to us, the people, to get this economy going again from buying a cup of coffee at your local “Cup of Joe” to buying a house whether you qualify for the tax credit or not. Let’s not only think positive but start talking positive. It’s a proven fact that smiles are contagious. Be realistic yet worry not.
Prince William Homes on March 1, 2009 7:15 pm
“Delusion!” We have not seen a peak in ‘unemployment’ nor have wee seen the first wave of Alt-A resets that will lead to another major wave of foreclosures much bigger than the sub-prime one.
Mark Wilson on February 14, 2010 8:52 am
I have the solution, we need massive amounts of capital infusion into the housing market. What does America have to sell, the ‘American Dream’ and security knowing that if things go bad in their native country, the have dual citizenship if they pass a Homeland Security test.
The American government makes an offer to the world, you can get a fastracked America family citizenship package if you purchase a home with 35% down, you own a piece of the dream. By offering 1-2 million packages, the housing market would rock, jobs in housing related fields improves ( which is a great part of the current unemployment problem ), and it wouldn’t cost the taxpayers billions, just go out and sell America. Plus America has one of the greatest salesmen on earth, President Obama.
If homeowners knew their biggest investment may start appreciating, consumer confidence grows, as will the economy and more jobs will return.
America was built by immigrants, let’s go back to what works and rebuild America with new investors and new talent.
Herman on July 16, 2010 2:32 am
Absolute villainy in keeping mortgage rates so high given the actual rate and they money in bonuses they are all giving themselves. These bankers are all disgusting and an utter disgrace.