American homeowners' perceptions of the value of their own homes moved more in line with reality at the end of 2008, at least when it came to hindsight. Fifty-seven percent of homeowners believe their own home lost value during the year, according to the Zillow Q4 Homeowner Confidence Survey. This is markedly more than the 38% who believed their home's value was declining when asked during the second quarter of 2008.
In reality, 76% of all U.S. homes lost value in 2008, according to analysis of the Zillow Q4 Real Estate Market Reports. With these new findings, Zillow's Home Value Misperception Index shrunk to 10 in the fourth quarter, from 16 in the third quarter and 32 in the second quarter. An index of zero would mean homeowners' perceptions were in line with actual values.
However, when asked what the near future will bring for their homes, most homeowners expressed optimism, and they seem to believe that the worst may be over. According to the survey, more than two-thirds (70%) of homeowners believe their home's value will either increase or stay the same in the first six months of 2009. Only 30% believe it will decrease.
Homeowners' optimism for the future does not extend to their neighbors' homes. While 70% of homeowners think their own homes' values will increase or stay the same in the first half of 2009, only 52% believe home values in their local market will increase or stay the same during the same time period. Nearly half (48%) think values in their local market will decrease, but only 30% believe the same will happen to their own homes.