Homeowners Optimism Over Housing Prices Increases

U.S. homeowners are increasingly optimistic about their future home values, even though they continue to overestimate just how well those values have been holding up in the current downturn, according to a new report.

Eighty-one percent of U.S. homeowners say they expect their homes will stay the same or increase in value over the next six months, according to a quarterly survey of homeowner perceptions by real estate date firm Zillow. It's the highest homeowner confidence level the survey has reported since the company began tracking the data in the second quarter of last year, and is up from 74 percent reported in the previous report covering the first quarter of the year.

The results suggest that homeowners increasingly believe the worst of the housing downturn is over, at least as far as it affects them personally. However, the survey also shows that many homeowners have a poor grasp of their current home values - 60 percent in the survey said they believed their own homes had declined in value over the previous six months, whereas in reality, 83 percent of all U.S. homes declined.

"Hope springs eternal for the U.S. homeowner," said Dr. Stan Humphries, Zillow chief economist. "While their perceptions of past declines in their homes' values have gotten more realistic over the past year, each quarter homeowners express the opinion that the worst is behind them. Unfortunately, that has not been the case thus far and it's far from clear that it's the case today."

Homeowners had a more pessimistic outlook when it comes to the future of their local housing market, with just 68 percent predicting that prices in their community will increase or stay the same over the next six months, with 32 percent predicting a decline. Only 19 percent expect their own home to decline in value during that time.

The improving outlook among homeowners regarding their own property values could motivate some who have been waiting for a market turnaround to go ahead and put their homes on the market. Twenty-nine percent of respondents said they would be at least somewhat likely to put their homes up for sale during the next year if the housing market improved. This so-called "shadow inventory" of homes waiting to enter the market that could continue to exert downward pressure on prices as the market works through an excess supply of homes.