Zillow: Some Homeowners Still Fooling Themselves

Zillow’s latest Homeowner Confidence Survey is at least worth a brief mention. According to the third quarter update, only 65% of homeowners in the West believe that their home declined in value over the last year, while in reality 85% of homes experienced falling prices. Read Zillow’s own blog post about the report here.

Zillow Q3 Homeowner Confidence Survey

Also interesting is the fact that 39% of those surveyed believed that their own home would decrease in value over the next six months, while 57% of that same survey group believed that the overall value of homes in their local market would decrease. I guess there are a lot of ultra-hyper-micro-local real estate markets out there.

The discontinuity between homeowner perception and reality was not as extreme as it was in last quarter’s report, but it still seems awfully large, especially if you believe (as many in the real estate industry do) that the media has been nothing but “doom and gloom” about the real estate market.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

28 comments:

  1. 1
    Slumlord says:

    I’ll sell you my house for $8 million.

  2. 2
    rose-colored-coolaid says:

    We’ve talked before about the cycle in confidence that follows booms and busts. I had been hoping that all the financial meltdowns would quicken the cycle, but the more I’m looking at numbers now, the more convinced I grow that we are still in some late form of denial. Considering that denial is one of the first phases of a falling market, it appears to me that we’ve got a ways to go still…

  3. 3
    jon says:

    This data is from an online survey. That is a ridiculous way to gather data in any event, but did the survey popup on buyaluxuryboat.com or uhual.com? Presuming it was on zillow.com, I would expect people who really are underwater aren’t sticking around that site for very long. But the headline “Homeowner Perception vs. Reality” is catchier than “Zillow Reader Perception vs. Reality”

  4. 4
    B&W Nikes says:

    According to the survey, it looks like us kooks in the west have an outlook a little more closely tuned to reality than the rest of the regions? Hmm. Even though they only asked about 350 people per region, or a handful per state, I have to say I like it anytime I see evidence the rest of the country looks more deluded than we do out here.

  5. 5
    deejayoh says:

    1. The survey was conducted online by Harris Interactive within the United
    States on behalf of Zillow.com between Oct. 7, 2008 and Oct. 9, 2008
    among 2,021 adults ages 18+, of whom, 1,388 are homeowners. Unless
    otherwise indicated, all data have been re-percentaged to exclude “not
    sure” or “don’t know” responses. This online survey is not based on a
    probability sample and therefore no estimates of theoretical sampling
    error can be calculated. A full methodology, including weighting
    variables, is available
    .

    not a confidence inspiring description of methodology

  6. 6

    B&W Nikes,
    I’m talking out of my rear end here, but in the Midwest, for the most part there wasn’t a “screaming bubble” like there was out here, so while prices here went out of the stratosphere, places in Iowa barely went up, and as prices have fallen, they have fallen less in places that didn’t see the huge rises, so…when people in the midwest say that prices have stayed the same, maybe they are actually closer to reality…I follow home prices in certain markets, and Little Rock, AR is one. Prices never skyrocketed there, and they’ve pretty much stayed flat for a couple of years now, or dropped just a little.
    That’s a place where you can buy a house to rent it out and make a profit.

  7. 7

    WE’VE ALREADY BORROWED OUR GRANDCHILDRENS’ MONEY TO PROP HOME PRICES UP

    It didn’t work, and on this continuous brainless linear path of uncontrolled population growth since 1990, its gonna get a lot worse….as our wages continue to go global [$2/hr] and deteriorate even more.

    If the change we seek is to borrow even more, i.e., our great grandchildrens’ money, to continue growing with wage mitigation and no industrial base….American home prices are doomed to sink forever in my book.

  8. 8

    […] Seattle Bubble: Zillow’s latest Homeowner Confidence Survey is at least worth a brief mention. According to the […]

  9. 9
    Scotsman says:

    “….the more convinced I grow that we are still in some late form of denial. Considering that denial is one of the first phases of a falling market, it appears to me that we’ve got a ways to go still…” RCC

    Given that the federal government has backstopped everything but our pet food bills over the last month, why should anyone think we aren’t through the worst ? It seems like every time I open Drudge or Bloomberg the government has decided to bail out some new entity, or has a plan to magically make all the bad go away. No one EVER asks how all this wonderfulness is going to be paid for, or what the long term consequences may be. None of the news is about realistic solutions, just more efforts to put off the day of reckoning for another month or two. But if all one ever does is read headlines, the worst would definitely appear to be over, and good times on their way.

    To hear some tell it, the bottom has already passed and recovery is happening as we speak!

  10. 10
    Thomas B. says:

    I like the link to happyrenews.com. It only proves once again that realtors are not the buyer’s friend. Maybe if realtors were more balanced in their press releases and analysis, I would believe them more, but so far they haven’t proven themselves to be trustworthy. Hence, I question why would they deserve a 3% cut of the sale price of a home. They are mere proxies for the seller’s agent. As I mentioned before, I think buyer’s agents should only get a flat fee.

  11. 11
    stephen says:

    The discontinuity between homeowner perception and reality was not as extreme as it was in last quarter’s report, but it still seems awfully large…

    Not really, the value of most houses probably exceed what they would sell for right now. The only houses being sold are distressed properties or by owners that really need to sell and are willing to do so in a crappy market. This no more establishes a REAL value anymore than the absurd run-ups a couple of years ago did.

    It’s a two way street. A house is worth what someone will pay AND what someone will sell for.

    Put another way, most of you did not buy during the run up because you didn’t buy into the value of houses matching what the market was saying they were worth. The reverse is playing out now with owners not buying into steep declines. Those who can (and that is most homeowners) will simply wait for the market to improve before they sell, even if that’s a very long time.

    Many of us actually like our homes, can afford them and will just stay put.

  12. 12
    buyStocks says:

    stephen,
    How did you come to this conclusion? Do you know most homeowners? Have they all told you that they like their homes? Sheesh, you can’t will the current market value to be something different… The prices that they are selling at now is the current market value. Sure, you can attempt to reason away the market, but that won’t change the current market value.

  13. 13
    jonness says:

    “To hear some tell it, the bottom has already passed and recovery is happening as we speak!”

    About all we can do is continue to save our money in order to take advantage of a collapsing system when it finally reaches bottom. Or who knows, we might end up needing it just to survive the storm. Those who don’t understand the nature of the correction will lose lots of money by not addressing their overconsumption “I want it now” habits. However, I do believe those sleeping will wake up when they lose $100,000.00 that must still be paid for over the course of the next 30 years.

    Interestingly, this correction represents a good money-making opportunity if you buy into the right things. For instance, I picked up Key Bank stock at $7.29. It’s now at $12.41. I keep wanting to sell it and pull the profits, but the govt. keeps pumping crazy money into the bank, which continues to drive the stock price up. I guess for now, I’ll hold it awhile longer and see what happens. The point I’m trying to make is there are still ways to make money out there that are pretty much no-brainer opportunities. Buying houses in Seattle is not one of them.

  14. 14
    economist says:

    only 65% of homeowners in the West believe that their home declined in value over the last year, while in reality 85% of homes experienced falling prices.

    Only 85%? Just where in the West have prices not fallen?

  15. 15
    stephen says:

    buyStocks,

    I didn’t say most, I said many of us like our homes and will likely stay put rather than sell in the middle of the worst market in decades. I also think it’s reasonable to assume that those that do sell have a real compelling reason and are more motivated price wise than sellers in a normal market. Just as those of you that called the bubble said ‘Now is not the time to buy…’, for homeowners now is not the time to sell.

    I think it’s a reasonable argument. This board is all about conjecture and best guesses with some history graphs thrown in, all about trying to peg the market at something other than what the house next door sold for. I am just pointing out that just as a bubble takes prices to artificial highs, steep corrections take houses to artificial lows.

    The truth is where it normally lies, somewhere in the middle and I personally think that it is hard to accept a market value when the market is in the middle of extreme transition. The bubble run up and the correction are BOTH examples of this.

  16. 16
    patient says:

    stephen, I think if you would like to move in the next couple of years now is probably the best time to to sell. My guess is that if you think the market has overshot to the downside and that your home will sell for more in the next couple of years you are fooling yourself. Hard to accecpt, yes but probablly less hard than the value when the correction is over.

  17. 17
    Alan says:

    Stephen make a good point. Humans are hard-wired for loss aversion. When a market is rapidly changing, no one knows where the bottom will be (or the top when it is changing upwards). On the way up, loss aversion keeps from selling because you don’t want to miss out on the upcoming gains. On the way down, loss aversion kicks in because you don’t want to sell at the bottom. If the market has stabilized at the top or at the bottom then it is easier to sell because the market price is more visible.

    To recap: It is an easier emotional decision to sell with a 30% loss in a stable market than it is to sell at a 15% loss in an uncertain market.

  18. 18
    patient says:

    Alan, I would agree with that if we were in an uncertain market but in a steadily declining market as this one it doesn’t make much sense to me.

  19. 19
    Alan says:

    Different people have different levels of certainty about future declines.

  20. 20
    patient says:

    Absolutely, and that’s what the headline of this post is all about.

  21. 21
    Curtis says:

    in 2005, I was outbid two times for a $505k house and another one for $485k. Many of the bidders did’nt have any finacial strenght to support the morgage but the banks gave them the loans they wanted. They thought they would get away with it as plan was to sell ithe house in a year to make a quick 100k and help for the bubble. Payback time for these clever guys.

    Thanks to those outbidders I kept my money and did’nt buy a house. Now I can buy a better house with less price.

  22. 22
    buyStocks says:

    stephen,
    I see where your coming from; increased downward volatility of the housing market likely does subtract from the value. My issue was that you are trying to separate the “real” value of the house from the “market” value. My argument is that’s just poor bookkeeping; the “real” and “market” value have to be the same thing. I think emotions get involved with such large invesments(I’m a condo owner, so I know); As an example, when you were assessing the value of your home during the upward slope of the bubble, did you even consider attempting to correct the “market” value with a “real value?

  23. 23
    TT says:

    Over the long run markets converge to fundamental values. In the short term supply, demand, and mania can push prices away from fundamental value.

  24. 24
    stephen says:

    You all make a good points as well.

    One can argue all day long that my house is worth less than I will sell it for but that simple fact in of itself resets the value of my particular house to what I think it’s worth because you cannot buy it for less :-)

    I do obviously understand that in the extreme this argument falls a part but in comparing my house to a distressed pre-forclosure or a bank owned property the logic I think is sound and my homes value will not reset to what they dump theirs for.

    If that were true we would never have a bottom to any market…

  25. 25
    what goes up must come down says:

    stephen — you miss the big point — you said “One can argue all day long that my house is worth less than I will sell it for but that simple fact in of itself resets the value of my particular house to what I think it’s worth because you cannot buy it for less :-) ”

    YOU CAN’T SELL IT FOR MORE THAN SOMEONE WILL PAY, see the key word is sell. If you don’t want to or need to sell than it won’t matter. But when the day comes if it does that you must sell you will only sell it for what someone will pay period. If the number is not what you want from what you said then you won’t make the sell — that is unless you must and at that point you will be forced to take what someone will give period.

  26. 26
    buyStocks says:

    Stephen,
    Your logic would only hold up if you were the only one selling the house, or if all other sellers formed a trust. If you can’t get that to happen, then it’s a free market. So if you put your house on the market with houses of equal value but with a higher price, it won’t sell, and the amount it would sell for is the current monetary value of the home. The only real truth is what that value is now. In the recent past your house value was higher, and the future is unknown; we could hit the bottom tomorrow, or we could hit bottom in 20 years.

  27. 27
    stephen says:

    YOU CAN’T BUY IT FOR LESS THAN SOMEONE WILL TAKE,

    This original post was about homeowners fooling themselves and cited polls that homeowners are not ack their home’s new value.

    I don’t think it’s unrealistic to determine that your house is worth more than it will bring in the worst RE downturn in 7-8 decades. The entire neighborhood is not fooling itself when it’s homeowners will not acknowledge that since the bank dumped the house on the corner for half what it sold for last year and a flipper sold a half finished re-model for 30-40% less than it comped for last year, that the neigborhood values have now re-set to those prices. That’s not true in any real sence of the market. It would only be true if the RE market were priced in a black and white fashion and the prices were set based on comps period. In a stable normal market they pretty much are. In a run away up or down market the comps go out the window and everything comes into play.

    I just do not in any way think I am fooling myself by feeling my house is worth more than it will bring today.

    Unless I had to sell it today, of course :-)

    I’m not sure we really disagree BUT there are a LOT of dynamics involved in pricing in todays market and no one should be selling a house that they don’t have to if money is an issue.

  28. 28
    deprogram says:

    By stephen @ 27:

    YOU CAN�T BUY IT FOR LESS THAN SOMEONE WILL TAKE,

    No, but you can buy the house next door.

    Here’s a good example. Two houses down the street from me. One with pricing left over from the boom years:
    http://www.redfin.com/WA/Renton/807-Grant-Ave-S-98057/home/229554

    And one with a more recent (and informed) take on the market:
    http://www.redfin.com/WA/Renton/811-Grant-Ave-S-98057/home/229553

    When I moved to Renton in 2008 the first house was listed at $695,000. Yes, really. They only adjusted downward after the house immediately next door came on the market at a far less breathtaking price.

    Saying that something is worth a given amount in dollars simply because it’s worth that much to YOU is a logical fallacy. I don’t know how I can put that any more plainly. It is actually worth what you can liquidate it for. No more. No less.

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