Perception-Reality Gap Shrinks in Third Quarter, but Many Still Show "Not My Home" Sentiment
Homeowners are not quite as confident as they were in the second quarter, when 62 percent said their homes either increased in value or remained the same, but a significant gap between the reality of home values and homeowners' perceptions persists. This is despite the timing of the survey - it was fielded from Oct. 7 to 9, during the worst week in stock market history.
Zillow's Home Value Misperception Index, which measures homeowners' perceptions of their home's value over time, shrank to 16 in the third quarter from 32 in the second quarter. An index of zero would mean homeowners' perceptions were in line with actual values.
Homeowners in the South and West had the most accurate perceptions of home values. In the South, where 67 percent of homes decreased in value, the Misperception Index was 13. In the West, where 85 percent of homes declined in value, the Misperception Index was also 13. Northeasterners' perceptions were most out of line with reality: 71 percent of homes there lost value, and the Misperception Index was 20.
McCain Voters Show More Confidence About Own Homes' Values Than Obama Voters
Homeowners who said they plan to vote for John McCain on Nov. 4 were slightly less realistic about their own homes' values over the past year and into 2009. But both McCain and Obama voters were over-confident, with only 50 percent of prospective McCain voters and 56 percent of prospective Obama voters saying their homes value had decreased over the past year. Almost three-quarters (74 percent) of homes across the country actually decreased in value.
Homeowners' Outlook for Next Six Months Gets Slightly More Conservative, Especially for Neighbors' Homes
Homeowners are slightly less optimistic about the future than they were last quarter, but believe the next six months will bring more stability to the housing market than the last 12.
While slightly more than half (51 percent) of homeowners believed their home's value decreased over the last year, only 40 percent think it will decrease in the next six months. Another 40 percent believe their home's value will stay the same, while only 21 percent think their home's value will increase. This is slightly less optimistic than the second quarter, when 32 percent of homeowners predicted their home's value would increase in the next following months.
Homeowners were less optimistic about their neighbors' homes, with 57 percent saying home values in their local market will decrease over the next six months.
Fewer Planning Home-Related Investment in Next Six Months
- Fewer expect to buy or sell a home in the near future. 3 percent said they plan to sell their home in the next six months, down from 5 percent last quarter. Another 3 percent said they plan to buy a home, down from 4 percent in the second quarter.
- Fewer are planning home-related finance activity, with 5 percent planning to refinance or to take out a second mortgage or home equity
loan in the next six months, down from 7 percent in the second quarter.
- 53 percent are planning either major (like replacing the roof or remodeling the kitchen) or minor (like installing a new garbage disposal or painting) home improvements. Of those, 47 percent plan minor improvements and 15 percent plan major improvements.
- Many homeowners expect to spend less on home and non-home-related expenses in the near future. 35 percent said they would spend either somewhat or significantly less on home-related activities, like improvements, new appliances or decor, in the next 12 months. 16 percent said they would spend significantly less. Only 3 percent expect to spend significantly more. Homeowners had similar responses when asked how they would spend during the 2008 holiday season, with 52 percent saying they would spend less than last year, and 3 percent saying they would spend more.
"After one of the most turbulent quarters in history for the U.S. economy and housing market, you'd expect the reality of dropping home values to start sinking in," said Dr. Stan Humphries, Zillow vice president of data and analytics. "We are seeing some movement toward more accurate perceptions of home value declines, but there's still a significant gap between reality and perception. We're seeing a fascinating distinction in consumer psychology - on the one hand, homeowners appear to understand the reality of today's economy and are curbing their household spending, but on the other hand they still aren't ready to admit that these woes might extend to their own homes. There's clearly still some denial."
