Foreclosures Are For Other People
How’s this for living in denial: Despite well-publicized bank runs and bank failures, a widespread foreclosure crisis that has left empty homes in once-exclusive subdivisions and an ailing economy that regularly generates depressing headlines, most homeowners seem to think their home values are doing just fine.
That’s what a new report from Zillow.com, a real estate Website, concluded. Zillow says that though 77 percent of U.S. homes values fell during the last 12 months, some 62 percent of homeowners think their homes either have maintained their value or actually increased in value. This rosy view by homeowners persists despite that fact that Zillow’s research shows that home values experienced their sharpest decline in 12 years during the first quarter of this year. Beyond that, one of every two homeowners who purchased at the market’s peak in 2006 is underwater on his mortgage, owing more than the home is worth, Zillow said.
The Orange County Register’s real-estate blog wonders whether there’s just some wishful thinking here on the part of homeowners. Zillow has another explanation:
“Whether it’s apathy, confusion or just plain denial, homeowners seem to believe the housing crisis affects every other home but ‘not my house,’ underscoring a wide gap between homeowners’ inflated perception of their home values and the gloomy market reality.”
Even more suprising, three of every four homeowners told Zillow they think their home values will either increase or remain steady over the next six months. But they don’t hold the same optimistic outlook for their neighborhoods; some 42 percent expect values in their local markets to drop.
This is an entirely new twist on “Not in My Backyard” syndrome. Zillow says it has created the Home Value Misperception Index to continue tracking this disconnect. It will be worth following up on the Index in a few months, especially if Bloomberg’s recently released pessimistic economic scenario for the rest of the year holds true.