Homeowners More Pessimistic About Housing Market

By:: Kirk Haverkamp | August 20, 2010

Homeowners have grown more pessimistic about the direction of the U.S. housing market, with one-third saying they believe home prices have yet to hit bottom.

According to the newly released Zillow Homeowner Confidence Survey, 28 percent of all homeowners think prices in their area will decline over the next six months, compared to 20 percent in the first quarter of the year. Those who expect prices will increase fell to 30 percent in the second quarter, down from 42 percent previously.

"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 Stan Humphries, Zillow chief economist. "Homeowners have become much more responsive to current market conditions than they were just two years ago, when a more typical reaction was denial.

Many homeowners not aware of home value changes

The survey found that some homeowners were overly pessimistic about the value of their own homes. Only 24 percent thought their homes had increased in value over the past year, when in reality, 32 percent of U.S. homes increased in value during that time.

At the same time, some homeowners remained overly optimistic. The survey found that 27 percent of homeowners thought their home values had remained steady over the past year, whereas market data showed that was true of only 7 percent of all homes. As a result, only 49 percent of homeowners thought their homes had lost value over the past year, but 61 percent of home had actually declined.

Looking ahead, most homeowners expected their home values will either increase (27 percent) or stay the same (35 percent) over the next year. Only 12 percent said they expected prices to decrease, while 26 percent said they didn't know what to expect.

Forecast remains weak

Humphries said that although there were some signs of housing prices stabilizing, he was concerned that was partly due to the homebuyer tax credit, which expired at the end of April. He said declining sales since the end of the credit will push up the inventory of homes available for sale, putting downward pressure on home values, as will the presence of millions of “sidelined” sellers who would like to sell their homes but are holding off due to low prices.

Overall, he said Zillow’s forecast remains for an anemic recovery, with annualized price increases in home values remaining very low for the next three to five years.

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