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American Homeowners Still in Denial but Less in Denial than Last Year 5 comments
I was bemused reading surveys a year ago about how many homeowners still thought the value of their home was rising and/or at least flat, while the reality was almost everyone was losing value. Must be the narcissism theme - this pain is around me, but certainly I am not subject to it. You could see this when so many people were putting homes on the market for prices that made little sense than sat aghast as no one came to their open houses.
Per Zillow.com, we are "up" to 60% who believe their home has lost value (even though the reality is 80%), but thankfully the majority now believe we have reached a housing bottom. These are the same majority who thought their home had not lost value 12-18 months ago. But I will say this - so much of this "shopping" economy is based on confidence, and I will give the administration credit for a great campaign of installing confidence - we've now hoodwinked the majority of Americans into believing housing has bottomed, and the banks would be solvent with just another $75 billion.
If so please let's take back rates to 4-5%, and withdraw all government support for said banks... you will see how quickly we have "bottomed". But as with the stock market - perception is reality, and if you can get enough people to believe housing has bottomed they will run out there to soak up some inventory. Granted, they will promptly be underwater in many cases within 3 months, but that's ok - you sold them on the thesis and they did their part.
Already, 75% of Americans believe their home value will be flat or increase in the next 6 months.
- Most American homeowners believe their home's value has declined over the past year, but a majority also think a bottom has been reached, real estate website Zillow.com said on Thursday.
- A majority, or 60 percent, believe their home lost value during the past 12 months, according to the Zillow Q1 Homeowner Confidence Survey. In reality, 80 percent of homes across the country lost value during the past 12 months, according to Zillow's first-quarter Real Estate Market Reports.
- Additionally, 18 percent believe their home gained value in the past 12 months, and 22 percent believe its value remained the same, according to the survey.
- "The perception of American homeowners is finally catching up to reality, which is that 80 percent of all homes in the country lost value during this past year," Dr. Stan Humphries, Zillow's vice president of data and analytics, said in a statement accompanying the survey.
- "While homeowners are now more realistic when looking backward, they are still pretty starry-eyed when looking forward, with three out of four homeowners believing that their own homes' prices will increase or be flat over the next six months. Unfortunately, there are few markets we expect to perform this well," he said.
This is my favorite part - yes, home values might be dropping around me but NOT MY house
- Most homeowners -- 74 percent -- believe their home will not decline in value in the coming six months, effectively calling a bottom to their own home's housing slide, Zillow said. Specifically, one in four homeowners, or 27 percent, think their home's value will increase in the next six months, while nearly half, or 47 percent, believe its value will remain the same.
Now, as we've stated in many pieces, there is a great amount of inventory of housing that is not on the market; these are sellers who still live in a dream parallel universe just waiting for housing to rebound (imminently) so they can get back to prices that "are fair" so they can unload their homes. After all, if you are underwater, you'd actually have to bring money to the table, and with crumbled balance sheets many simply can't do that. So all they have to do is wait "a few months" for housing value to bounce, and then BOOM - they can relist their home that they have been itching to get out of.
- It also showed a significant number of potential sellers are holding back due to the current market. When asked about future plans to sell, 31 percent of homeowners said they would be at least "somewhat likely" to put their homes on the market in the next 12 months if they saw signs of a real estate market turnaround, the survey showed.
- "Also interesting is the information we have for the first time this quarter on the levels of 'shadow inventory' - homes that people would like to sell but that aren't currently on the market, and thus aren't captured in the official number of homes on the market," said Humphries. "With almost a third of homeowners poised to jump into the market at the first sign of stabilization, this could create a steady stream of new inventory adding to already record-high inventory levels, thus keeping downward pressure on home prices."
And that folks is exactly why as the pundits breathlessly (arms waving of course) will tell you housing inventories will be decreasing in the months to come, and the stock market will rage higher when indeed the second derivative data point arrives; a new wave of housing stock will be waiting right behind it. And another. And another. But this won't stop the stock market anxious to find any green shoot, and hence we have some housing theme positions to take advantage of that "green shoot discovery anxiety disorder." As always, in the stock market it does not matter what reality is, it matter's what the herd's perception of reality is.
I will continue to say those jumping in the housing market (excluding foreclosures at 50%+ off market prices) thinking they are getting bargain prices are akin to those people buying NASDAQ stocks at 50% off in latter 2001 - thinking they were getting bargain prices. Then came 2002.