More than one-quarter (28 percent) of U.S. homeowners said home values in their local real estate market will decrease in the next six months, up from 20 percent in the first quarter. Additionally, less than one-third (30 percent) believe home values in their local market will increase, down from 42 percent in the first quarter.
Despite the increasing pessimism, a large number of homeowners anxiously await the opportunity to sell. Five percent of U.S. homeowners say they are very likely to put their home on the market in the next six months if they see signs of a real estate market turnaround. This translates into 3.8 million homes with the potential to come into the market(iii). By comparison, 5.2 million existing homes were sold in all of 2009(iv).
Looking backward, homeowners also became slightly more pessimistic about the performance of their own homes' values in the past year. Less than a quarter (24 percent) of homeowners said their home had increased in value in the past year, compared to 27 percent in the first quarter. In reality, 34 percent of homes increased in value in the second quarter, according to the Zillow Q2 Real Estate Market Reports.
"As homeowners have been so inundated recently with news of declining home sales post-tax credit, it's no surprise that they would become more pessimistic about the future of home values," said Dr. Stan Humphries, chief economist at Zillow.com®. "Homeowners have become much more responsive to current market conditions than they were just two years ago, when a more typical reaction was denial.
"Given this sentiment, we're surprised so many homeowners believe their market has already bottomed. Although our Q2 reports indicated signs of stabilization in 30 percent of markets we cover, we're concerned that this was at least partly due to the homebuyer tax credits. We're already seeing payback for the credits in the form of declining home sales, and this trend will push up inventory levels and exert downward pressure on home values. Add in the inventory from the millions of sidelined sellers and we'll take more steps back. Our forecast remains largely unchanged: We're in for an L-shaped recovery that will likely keep annualized home value appreciation very low for the next three to five years."
Long-term home value expectations vary by region
Looking further into the future, the majority of homeowners believe their own homes' values will either increase (27 percent) or stay the same (35 percent) in the next 12 months, while 12 percent expect a decrease and 26 percent don't know.
Of those who expect their home's value to increase, the median expectation is a rise of 6 percent, although that varies by geography. Northeastern and Western homeowners who expect an increase anticipate a median rise of 10 percent, while Southern and Midwestern homeowners expect a median increase of 5 percent. Those who expect their home's value to decrease in the next year anticipate a median decrease of 10 percent.
(i) Unless otherwise indicated, all percentages are based out of homeowners who think the value of their home has increased, decreased or remained the same since this time last year. Percentages have been recalculated to exclude "not sure" or "don't know" and/or not applicable responses.
(ii) The survey was conducted online by Harris Interactive within the United States on behalf of Zillow.com between July 27 and July 29, 2010 among 2,163 adults ages 18+, of which 1,482 are homeowners. 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 and survey results, is available by contacting press@zillow.com.
(iii) According to the U.S. Census Bureau, there are 75.3 million owner-occupied homes in the United States, 5 percent of which is 3.8 million.
(iv) Existing-home sales, according to the National Association of Realtors Jan. 25, 2010 press release.
(v) Zillow Home Value Misperception Index measures the gap between homeowner perception of changes in their home's value as reported in the quarterly Homeowner Confidence Survey conducted by Harris Interactive, and actual home value changes as reported by Zillow in its quarterly Real Estate Market Reports. The Misperception Index is calculated from an adjusted base of homeowners who think their home value changed – increased or decreased – and excludes "not sure" AND "remained the same" responses. The Index is the difference between those who think their home's value increased (32% adjusted, from survey) and the percent of U.S. homes that actually increased (34% adjusted, Zillow Q2 data) in value year-over-year on an adjusted base of home values that changed by more or less than one percent (excludes homes that remained the same within one percent). Zillow Q1 data is based on analysis of Q2 Real Estate Market Reports.
