SEATTLE, Feb. 18 /PRNewswire/ -- American homeowners' confidence in their own homes' values during the fourth quarter fell to the lowest level in seven quarters, with just one in five (20 percent) believing their own homes' values increased during 2009, according to the Zillow Q4 Homeowner Confidence Survey. In reality, 28 percent of homes increased in value during the year, according to Zillow's Fourth Quarter Real Estate Market Reports.
That resulted in a Zillow Home Value Misperception Index of negative two - the closest to zero on record since Zillow introduced the index in the second quarter of 2008, when the index was at 32. A Misperception Index of zero would mean homeowners perceptions' were in line with actual values. A negative Misperception Index indicates that homeowners are overly cynical about their own homes' values when compared with reality. This is the first time the national index was negative.
Half of homeowners believe their own homes lost value during 2009, while 30 percent believed their homes' values stayed the same. In reality, 65 percent of homes lost value during the year, and values remained the same for 7 percent.
The results demonstrate the "not my home" sentiment that was once prominent among American homeowners has faded. One year ago, nearly half (47 percent) of homeowners believed values in their local market would decrease in the next six months. However, when asked about their own home, fewer than one in three (30 percent) believed their own home's value would decrease.
Now that gap has shrunk, with 22 percent of homeowners believing their local market will lose value over the next six months and 14 percent believing their own home will lose value.
"Homeowners are finally succumbing to the notion that, in most areas, declining home values over the past year are no longer the exception, they are the rule," said Dr. Stan Humphries, Zillow chief economist. "Almost three times as many people believe their home's value will increase over the next six months as believe it will decrease in value, a level of optimism that is likely to outpace actual performance in the near-term.
Given recent news about the stabilization of home values in some markets, I can see why homeowners are so optimistic. However, home values in many markets are still under substantial downward pressure from high levels of foreclosures and we don't believe we'll see a definitive bottom nationally until the second quarter of this year. We're not out of the woods yet."
Homeowners in the Northeast and West are overly cynical about the value of their home. Three-quarters (78 percent) of Northeastern homeowners said their home lost value or stayed the same in the past year when just over half (58 percent) of the homes actually did. This disparity between perception and reality resulted in a Misperception Index of -14, making Northeasterners the least aligned with reality. Western homeowners, who last quarter were the most optimistic and the least aligned with reality, did an about-face in the fourth quarter. They now are slightly cynical with a Misperception Index of -5.