Homeowners are more pessimistic about the short-term future of home values in their local market than they have been in the past three quarters, according to the Zillow second-quarter Homeowner Confidence Survey. One-third of respondents believe home values in their local housing market have not yet reached a bottom, while 38% believe home values have already reached a bottom.
‘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,’ says Stan Humphries, chief economist at Zillow. ‘Homeowners have become much more responsive to current market conditions than they were just two years ago, when a more typical reaction was denial.’
More than one-quarter (28%) of U.S. homeowners said home values in their local real estate market will decrease in the next six months – up from 20% in the first quarter. Additionally, less than one-third (30%) believe home values in their local market will increase – down from 42% in the first quarter, Zillow says.
Despite the increasing pessimism, a large number of homeowners are anxiously awaiting the opportunity to sell. Five percent of U.S. homeowners say they are very likely to put their home on the market in the next six months if they see signs of a real estate market turnaround, translating into 3.8 million homes with the potential to come into the market. By comparison, 5.2 million existing homes were sold in all of last year.
Looking backward, homeowners also became slightly more pessimistic about the performance of their own homes' values in the past year. Twenty-four percent of homeowners said their home had increased in value in the past year, compared to 27% in the first quarter. In reality, 34% of homes increased in value in the second quarter, according to the Zillow Q2 Real Estate Market Reports.
‘Although our Q2 reports indicated signs of stabilization in 30 percent of markets we cover, we're concerned that this was at least partly due to the home buyer tax credits, Humphries says. ‘We're already seeing payback for the credits in the form of declining home sales, and this trend will push up inventory levels and exert downward pressure on home values. Add in the inventory from the millions of sidelined sellers, and we'll take more steps back.’
Humphries adds that the market is in for an L-shaped recovery that will keep annualized home-value appreciation very low for the next three to five years.