Homeowners Think Housing Market Has Bottomed: Survey

U.S. homeowners are increasingly coming to terms with declines in property values, but many remain unrealistically optimistic about the value of the own property, especially in regard to future trends, according to a new survey of consumer confidence.

According to the quarterly Zillow Homeowner Confidence Survey, 60 percent of U.S. homeowners believe their home declined in value over the previous 12 months, and over 20 percent believe the value held steady. In reality, 80 percent of U.S. homes lost value during that period, according to the company's survey data.

Looking forward, homeowners expressed optimism about the direction of the housing market in the near term. Nearly three-quarters said they do not expect their homes to decrease in value over the next six months, in effect saying they believe the housing market has bottomed out.

Fully one in four said they expect the value of their own home to increase during that time, and two-thirds said they expect their overall local home markets will increase or stay the same.

"While homeowners are now more realistic when looking backward, they are still pretty starry-eyed when looking forward with three out of four homeowners believing that their own homes' prices will increase or be flat over the next six months," said Dr. Stan Humphries, Zillow's vice president of data and analytics. "Unfortunately, there are few markets we expect to perform this well."

Of the four U.S. regions (Northeast, Midwest, South and West), homeowners in the south had the most unrealistic attitudes regarding property values, with only 49 percent saying they believed their home had declined in value, compared to actual declines on 74 percent of homes in the region. Factors that could boost home values over the coming months include low interest rates and an $8,000 tax credit that are drawing strong interest from first-time homebuyers. The Obama Administration is taking aggressive action to halt the decline in home values and has indicated it will continue to take new steps to stabilize the housing market.

On the other hand, there are numerous factors that could continue to exert downward pressure on home values. The supply of foreclosed homes on the market remains high, and will likely increase in the months ahead as rapid rises in unemployment in the first three months of the year turn to foreclosures down the road.

In addition, the Zillow survey found that nearly one third of homeowners expressed at least some interest in selling their homes once the housing market begins to recover. Zillow's Humphries said this so-called "shadow inventory" of homes that people would like to sell but aren't currently listed could be a factor down the road.

" With almost a third of homeowners poised to jump into the market at the first sign of stabilization, this could create a steady stream of new inventory adding to already record-high inventory levels, thus keeping downward pressure on home prices," he said.

The quarterly Zillow Homeowner Confidence Survey was conducted in early April and covers the first quarter of 2009.