Home Price Reality Check

There's a new poll up at the Zillow blog where homeowners all across the U.S. were asked what they think happened to the value of their home over the last year and what the year ahead might bring.

As expected, many homeowners remain blissfully unaware of the carnage that has recently occurred in the nation's housing market and are far too optimistic about what the future holds.

But, some of this is quite understandable - after all, we don't all obsess over this stuff.

If you've been in a place for years with no plans to move, haven't had the need to "tap" your home equity only to find less of it there, and don't see the need to keep track of what nearby houses sell for, you're probably not really qualified to offer an opinion on this anyway.

It's like asking someone who doesn't know or care about the S&P500 where stocks have come and where they're going. Despite what the National Association of Realtors might tell you, housing hasn't always been viewed as an investment by everybody - many people still look at their house as an asset that depreciates in real terms when upkeep, taxes, and insurance are factored in.

For those who do view their home as an investment, it's easier than ever to get some kind of an idea what real estate is worth with the rise of websites like Zillow. I became painfully aware of Zestimates after we sold our Southern California house a few years back, only to watch the Zestimate rise to $805,000 during the 2006 peak - it's now at $535,000.

Anyway, the survey data for how homeowners think home prices have moved over the last year is interesting, but, in my view, not all that surprising.

Here are the results by region:
And, a short excerpt:

There’s no doubt we’ve been deluged with depressing economic and housing news over the past few months. Every day is a new headline, every channel has a new pundit and the recession debate has shifted from “if” to “how long.”

Given this, when fielding our Q3 Homeowner Confidence Survey earlier this month, we expected the results to be markedly different than last quarter, when 62% of homeowners thought their home’s value had increased or stayed the same (despite 77% of homes losing value). The Q3 Survey, fielded October 7-9 (the worst week in stock market history, by the way), asked homeowners their perception of their home’s value over the past year, and what they think will happen to their home’s value in the coming months.

The results — kind of baffling. While the perception gap did narrow, still half of U.S. homeowners do not think their home’s value has declined over the past year.

Specifically:

* 32% think their home’s value increased in the past 12 months
* 17% think their home’s value held steady
* 51% think their home’s value declined

In reality, three-quarters (74%) of U.S. homes lost value in the past 12 months, according to Zillow’s Q3 data.

What was surprising about the survey was that optimism about the future is still quite strong, with 61 percent believing their home will maintain its value or increase over the next six months.

Only 49 percent felt this way about the last year, but in the period ahead, somehow people think things will improve.

Given what's been in the news for the last few months, that seems far too rosy a view for anyone, except of course for those people who have been living in a cave since August of last year.

Comments

[Dr. Jackpot:]

The upside of lower prices for investment homes is that you will owe less capital gains when you sell and your cash will buy just as much as before. The only loser is governments at all levels. They live off inflated assets and you pay the bill. This is the real reason government is so intent on stopping the slide. It has nothing to do with helping the deadbeat walkaways. They could care less.

2008 Oct 30 11:37 AM

[MSmailbox:]

"If you've been in a place for years with no plans to move, haven't had the need to "tap" your home equity only to find less of it there, and don't see the need to keep track of what nearby houses sell for, you're probably not really qualified to offer an opinion on this anyway."

Qualified, or not... This is exactly my situation. The best reason that I have for determining the value of my home, is so that I can have it reassessed, in order to reduce personal property taxes and insurance premiums. There is always a reason to remain aware of valuations.

2008 Oct 30 11:47 AM

[Tom Armistead:]

Maybe these people don't believe the Case/Shiller numbers that make the headlines every month.

Case/Shiller does only 20 metropolitan areas and overweights recent transactions. The decreases they give out reflect the worst case - someone who bought at the peak and got foreclosed.

Mark to market accounting doesn't apply if you don't have to sell.

2008 Oct 30 06:51 PM

[breckandy:]

My home is worth just as much to me as it always was.

2008 Oct 30 06:55 PM

[vreporter:]

Polling homeowners about the value of their house is like asking the cat if it ate the mouse. Why is denial so surprising? It's just plain bad data!

2008 Oct 30 09:28 PM

[3rd worlder:]

Home values are worth 2-3 times the average household annual income in any given area. Take the highest case scenario of San Francisco with an average household income of $125,000 times the highest case scenario of 3 times and you get an average home value of $375,000. Can you see now where home values will have to adjust. Trust me. Incomes determine values.

2008 Oct 31 08:25 AM

[john1:]

Just more unpatriotic negativity from liberals who hate America, and the troops.

2008 Oct 31 11:51 AM

[Zeppelin:]

This should be considered a "Good" thing for politicians. The more prices Drop, the easier the solution for the "Affordable Housing" issue. They say they want Affordable Housing, but they write bills to try and prevent the Housing Correction from happening!!!
Oh, I get it, they just want to TAX us at the higher ASSESSED Value, but want us all to be able to Afford the Monthly Payment...

2008 Nov 01 09:51 AM

[ki:]

I routinely follow friends' houses on Zillow to see their Zesstimates. A friend's house in the San Diego area is showing a VERY sharp increase over the last month after a slow decrease for the last 10 months. Zillow says her house has appreciated $189,000 in the last 30 days.

Zillow would be a great tool if it were accurate, but I have my doubts.

2008 Nov 01 09:58 AM

[Fowler1972:]

As usual, the average unaware "American" doesn't realize the extent of the damage until they are forced to realize it. We have a tendency to look at everything through rose colored glasses, then they are torn from our face forcefully by 1) Unemployment and mass layoffs 2) Over 40% losses in our retirement/ 401 k. 3) The "real" dollar amount/ worth of our homes. This unrealistic mentality of growing home values contributed to the "fall of capitalism" through "flipping" homes. The thought was that prices will only increase, everyone will be rich and we will "eat cake"! The "wake up" call has only begun to sound, we are watching history unfold. Furthermore, it is time to hold our representatives responsible for their continued destruction of our economy and bad fiscal decisions...Time for a revolution, can you say guillotine?

2008 Nov 01 04:25 PM

[sickofthehype:]

Zillow is almost like throwing darts at a board with various home prices on it.

Zillow means zilch. Go buy a magic 8 ball.

2008 Nov 01 10:45 PM