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AUGUST 2008 BEACON Zillow.com Says Americans are Fooling Themselves about Housing Crisis:
Doesn’t Affect Me!Company Launches Home Value Misperception Index to Measure Disparity between Real Value & Homeowners Perception <August 6, 2008>Zillow.com, an online real estate community, announced today that it has launched a new index – called the Home Value Misperception Index – to measure the gap between the actual housing market reality, and homeowners perception of the impact of the housing crisis on their situation.
According to a recent survey conducted by Zillow.com, the Homeowner Confidence Survey, 62% of survey respondents said their home’s value increased or stayed the same over the last twelve months. Actually, according to a preliminary report by Zillow to be released later this month, 77% of American homes declined in value over the last twelve month, 19% increased in value, and 5% stayed the same. This result suggests that Americans suffer from a misperception of the reality of the housing market decline, the worst decline since the Great Depression.
In order to track this misperception, Zillow.com has created the Home Value Misperception Index showing the difference between the adjusted percentage of homeowners who believe their homes increased in value against the adjusted actual percentage of homes that increased in value.
Overall, the national average misperception index level is a significant 32. As seen in the accompanying table, it would appear that homeowners in the South and Midwest regions are most out of touch with market realities. The West region, one of the hardest hit in the current housing market downfall, seems to have come to grips with the reality of the situation…at least as compared with other regions.
| Home Owner Perception | US 2008 | Northeast | Midwest | South | West | | My Home's Value Has Increased | 40% | 39% | 39% | 48% | 28% | | My Home's Value Has Decreased | 38% | 38% | 39% | 28% | 56% | | My Home's Value Has Stayed the Same | 22% | 23% | 22% | 23% | 16% | | Market Reality | | | | | | | Actual Percentage of Homes that Increased | 19% | 20% | 18% | 26% | 9% | | Actual Percentage of Homes that Decreased | 77% | 74% | 77% | 69% | 88% | | Actual Percentage of Homes that Stayed the Same | 5% | 5% | 5% | 6% | 3% | | Home Value Misperception Index | 32 | 29 | 31 | 36 | 23 |
The survey also produced some other interesting results:
• 75% of Americans go on to believe that their homes values will continue to increase over the next six months, while only 25% expect a decline. Yet 42% expect values overall in their markets to decline, while 58% think the overall market will increase. In any event, the survey respondents think that they personally will do much better than their neighbors.
• 92% of homeowners are aware of home foreclosures within their local markets. 82% of them expect about the same level of foreclosures over the next six months as up to now. 70% of American homeowners are concerned about foreclosures causing a decline in home values in their market. Interestingly, 48% of respondents say there should be no government bailout of homeowners in default. 28% favor government involvement and 24% “Don’t Know.”
• Homeowner optimism spurs investment as 56% of survey respondents are planning some type of home renovation project…either major (new roof, kitchen remodel) or minor (repaint or wallpaper a room). Of the overall percentage, 17% plan major improvements and 49% plan minor improvements.
• 7% of the survey respondents said they plan on some type of financing activity such as refinancing their mortgage, taking out a home equity loan, or taking out a second mortgage.
• 7% of the homeowners said they are planning to buy or sell a primary or secondary residence..
For more information: visit www.zillow.com.
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