It’s hard to turn anywhere these days without hearing about the housing market slowdown, sales slumps or mortgage and credit woes. But who is really affected by all these reports? Not me. Well, I don’t think it’s me. Maybe it’s everyone around me, but certainly not me. This, at least, seems to be the sentiment most homeowners have, according to a recent survey we conducted with Harris Interactive in which 77% of homeowners said they think their home has either stayed the same or increased in value during the last year.
Perhaps if everyone surveyed was living in the Pacific Northwest or parts of the Midwest and Colorado that have posted strong gains, however our survey involved over 1,600 people from all over the country– different ages, genders and socioeconomic groups. Here’s how the breakdown of perception across geographies along with Zillow Zindex data showing corresponding YOY value declines. You can also read our media alert for specific details or check out how BusinessWeek used the data.
We’ve been hearing for awhile how many homeowners who put their homes on the market in recent months often start at prices much closer to what you’d expect 1-2 years ago. Many sellers’ agents say this is a perception-reality gap they’ve seen time and time again. They describe it as initial denial that will eventually come closer to reality as time passes with little or no offers.
What we’ve uncovered here is a variation of that same type of denial affecting sellers along with the fact some people simply aren’t paying attention probably because they don’t need to. This likely reflects the fact that most Americans have not realized home-related losses because they’re staying in their homes. Even in declining markets where a greater percentage of new homeowners are underwater on their mortgage, it’s important to remember most people are not really affected by declining home values unless they absolutely must sell or need to immediately refinance or withdraw equity. This has contributed to the healthy investment intent, particularly in home upgrades, despite the downward trending markets.
Our survey also revealed that a sizable fraction of all homeowners – not just those who believe their homes appreciated in 2007 – say they are planning to do things in 2008 – even before the Fed’s latest interest rate cuts – that you might not expect during the housing, construction and credit slumps:
- 82 percent will spend the same or more on minor home improvements (install new garbage disposal, repaint or wallpaper a room)
- 67 percent say they will spend the same or more on major home improvements (replace the roof, remodel the kitchen) this year
- About a third say they are more likely or equally as likely to:
- Take out a home equity loan (35%)
- Refinance their mortgage or take out a second mortgage (36%)
- Sell their homes (34%)
The good news is consumers have a positive outlook despite some of the market rough spots and it’s helpful for everyone in the industry to be reminded that people are still investing in their homes and even considering selling. The relatively low prices we’re seeing now combined with the Fed’s recent cuts will likely bring out more would-be buyers this season that could help stimulate the market.
In the meantime, we’re working to help narrow the perception-reality gap at Zillow by offering our users more ways to find out what’s going on in their local real estate market. One such way is through our quarterly Home Value Reports that will be released for Q4 next Tuesday, Feb. 12 that provide a national snapshot along with details on an expanded list of 125 Metropolitan Statistical Areas. Check back here Tuesday for an update. We also encourage you to check out a teleconferece on these reports that I’ll be hosting at 11:00 AM PT to learn more about how markets nationwide fared in Q4 and what the results mean in the broader context of the real estate market. To join, dial toll free: 1.866.250.4375
Dr. Stan Humphries is a real estate economist and real estate expert for Zillow. Stan is in charge of the data and analytics team at Zillow, which develops housing market data for most major metropolitan statistical areas in the U.S., and provides economic research for current real estate market conditions. He helped create the algorithms for the popular Zestimate® home value and the Zillow Home Value Index (ZHVI).
Source: zillow.com