Zillow measures homeowners' perception gap

Just like with most of life's unpleasant realities, the majority of Americans think the nation's housing crisis is something that happens to the other guy.

That's according to a survey of more than 1,300 homeowners conducted by Zillow. Two-thirds of homeowners believe their house has increased in value or remained the same in the last year. Yet, these same folks acknowledge the existence of foreclosures in their neighborhoods and believe that more are on the way.

The results even gave the Zillow people pause.

"We attribute this gap to a combination of inattention and a fair bit of denial that causes people to believe their home is insulated from the woes of the market that affect others, but not them," says Stan Humphries, Zillow's chief of data and analytics.

Zillow, of course, is the website founded by the brains behind Expedia that came on strong more than two years ago with its clever algorithms that assign a "value" to nearly every house in America. Initially, the site was a bit disappointing because, at least in many parts of Southern California, its estimates seemed wildly off the mark.

Since then, reality has caught up with Zillow, if not its homeowner-users. The company's data now appear to be in line with most other research that shows the vast majority of U.S. houses lost value in the last 12 months.

One of the more interesting findings of Zillow's latest survey shows that homeowners in the West seem to have a slightly better grip on the housing reality. More than half -- 56% -- of Western homeowners believe their home value had indeed declined in the last year, versus 38% of homeowners overall. (See the graphic above right.)

Maybe that's because homeowners here are facing a harsher reality. After years of tremendous price appreciation, the stinging face-slap of rapidly depreciating values has brought homeowners to their senses.

-- Annette Haddad

Graphic: courtesy of Zillow

Questions? Comments? Email annette.haddad@latimes.com

 

Comments

[amir]

Only half think their homes have declined and even them would be unpleasantly surprised to learn by how much. That means that most homeowners are in denial. That is not the last stage of a drop, but the first.

[anthony]

I wonder whether zillow's home valuations ("zestimates") or their polling is more accurate. Zillow seems to be overvaluing my neighborhood (olympic and la brea).

[Laker]

For those responsible true home owners that intend to live long term in their primary residence (not flippers) and they don't need to pull home equity lines, they should care less if their house lost some value in the last year.
In fact, they should cheer for it since they can possibly reduce their property taxes.

However, for the flippers and specuvestors, this is terrible news as their investments have lost value, and the ability to flip diminished and continue to diminish.
Still it is funny how about HALF the home owners are in true 100% denial. Better rephrase it; Half the people that own their homes are home owners, the other half are really loan owners and defacto rent the house from the bank. (albeit as long as they pay, they can paint their walls as they wish)

[Laker]

anthony,
Zillow is over valuating some neighborhoods and possibly undervaluing other places.
I don't know labrea- Olympic but i do know pretty good the western portion of SFV. Here is SFV, zillow is overvaluing properties by about 20%.
But still i find their zestimate a great tool. All one needs to do, is to multiply their zestimate by 0.8 and you get the market value almost perfectly!

I would appreciate if zillow could fix that, readjust the values 20% down, and thus save me the hassle of multiplying by 0.8....

[Rational Renter]

Yeah, I find Zillow's "zestimates" to be pretty badly overpriced. That's not just looking down the road, either. They wildly overshoot current sales prices and even listing prices.

[Tejano]

Zillow just about doubled my entire neighborhood one day last February. It isn't reality, but it sure makes me feel warm and fuzzy.

[The Original RZ]

I'm assuming that these folks who think that their home value is higher or the same are not looking to sell anytime soon (otherwise they should be more aware of the reality). But assuming I'm correct, does it really matter if they think their value declined or not?

[Richard Greenwood]

Here in California, we are referring to this as "The Great Correction"

http://TheGreatCorrection.com

[xtine]

True Story:
I was in the Griffith Park playground about 9 months ago (with my son, thank you) and we had an interesting mix of parents hovering around the sandbox.

1) Los Feliz Homeowner
2) Real Estate Agent
3) Couple from Georgia
4) Relieved renter (that's me)

GEORGIA: We just moved here for a job.
RENTER: Awesome. How's it going for you?
GEORGIA: Not bad. But it's weird living in an apartment with the kids. We're thinking about looking for a house. Know any good neighborhoods?
HOMEOWNER: Los Feliz is great. You have the park, good schools...
RENTER: You know, my advice is you should wait a year.
AGENT: (silence)
HOMEOWNER: (silence)
GEORGIA: Why’s that?
RENTER: Because the market’s about to crash like a Cessna full of ballplayers and rock stars.
GEORGIA: (to agent) What do you think?
AGENT: I think we’ll see some more softening in the market.
HOMEOWNER: But not in Los Feliz. Right?
AGENT: Los Feliz is a great neighborhood.
HOMEOWNER: Comps will stay around 800.
GEORGIA: 800?!? Wow. That’s...wow....and this is a good job. But we can’t touch that.
AGENT: I think we’ll see some more softening.
RENTER: Fasten your seatbelts.
HOMEOWNER: I think Los Feliz is safe. It won’t go down.

And there you have it.

[John D.]

Zillow sometimes trails the market. When prices were going up, it tended to underprice homes because of comps. And, probably, the opposite happens on the downside -- i.e., that valuations don't decline fast enough. In my neighborhood -- where sales prices have not declined markedly (yet) -- Zillow seems about right. It obviously, fails to discount houses close to main roads like Olympic and Santa Monica appropriately, imo, and can't account for house condition, remodeling, particularly desirable or undesirable streets, etc.

Laker is right, though. For people who have bought a house, who intend to hold, the fluctuations shouldn't be a concern unless you have to relocate or become unemployed for a long period of time. My guess is that most people are not paying attention to their home values. Also, in most of the country, the fluctuation in house prices is much, much lower in absolute dollar terms for an average homeowner.

[Scott McIntosh]

Zillow has been more like a gimmick for the Westside area. I have seen large inaccuracies in price evaluations in both directions. Don't get me wrong, it can be a good tool. However, the evaluation is no substitute for your own research, as well as a RE professional who knows the local marketplace.

http://www.thewestwoodblog.com

[pugtv]

To all the angry house owners / RE agents on this blog (ahem ... Shockg),

Look up your home on the zillow estimate and multiply your house value by 10. That's the value of your house. Now doesn't that feel good? Just feel the anger slipping away =)

[mike]

chers house is lister for 45m

[Bubblewatcher]

"Laker is right, though. For people who have bought a house, who intend to hold, the fluctuations shouldn't be a concern unless you have to relocate or become unemployed for a long period of time. "

Can we stop deluding ourselves here, please? NOBODY who isn't a real estate investor buys a place intending NOT to stay long-term. I've yet to hear ANYBODY I know who's buying a home to live in go into it saying they'll be in it for a year or two and then move! And yet, plenty of people are selling into this market, much as they'd probably rather not.

Why? Because believe it or not, life happens, even to people intending to stay in their homes forever and ever. Stuff like divorce, or a job change and relocation, or more kids, or any number of quite unexpected reasons for selling.

Which is why EVERY homeowner, no matter how contented, needs to be at least vaguely aware of the potential resale value of their home, and must not buy at a time like this (or the past three years, for that matter) when it's likely they'll have to sacrifice their downpayment (if not more), in order to sell their home.

[Oilman]

While I would agree that those who bought some time ago, or who intend to stay for awhile, don't have to worry about the falling valuations. But, there are other situations to remember.
Many people took out HELOCs and cashed out most of their equity. Their cushion is gone and even if they don't need to sell, they will feel behind the ball. Those with equity lines of credit will lose that line, as is happening to many as we speak. These people will 'feel' poorer even if they didn't 'lose' anything.
In addition, anyone who bought after 2003-4 is, or is close to being, underwater already. This will make the situation worse and increase the chances they will walk away in the future.
In my mind, a key learning from the 'mortgage crisis' that many people forgot is that equity -skin in the game - has a hugh impact on people's behavior. I will be much more rational if I have something to lose, and pretty irrational if I have nothing to lose. Falling values will impact perceptions for most, and reality for many.

[John D.]

Bubblewatcher --- If you have money in the bank and/or fair amount of equity and you have no desire to sell, there isn't any reason to prepare for the contingency of selling. For instance, there is no way I would have to sell in a dip. I would stay put, rent the house, leave it vacant, etc., and wait for the market to bounce back -- which, historically, it always does. My point also was that an unrealized gain/loss in home value has no real impact on finances. Finally, I disagree with your statement that "NOBODY" buys short term. I know a ton of people who have done this! A lot of people buy with the plan of trading up. Not saying it is wise, but it is common. And a lot of people can afford to do it.

[sfvrealestate]

I never seem to get answers to this question on this blog: why do you all put such stock in Zillow? Their great graphics? Their suspicious algorithms? And how, in the world, can Zillow possibly detect added interior value unless it is, indeed, some supreme deity with xray vision?

As far as the survey results, they're not surprising. Not everybody reads this blog or looks at Dataquick's numbers. And looking at your home's value every month, if you don't plan to move, is as pointless as looking at your stock's value everyday, if you don't plan to sell.

[Gene J]

My sister is in an interesting predicament. She came into some money 10 years ago and bought a 250,000 house years ago putting 50,000 down. Every 2 years she would move up and roll the equity into a new place where today she has a 700,000 house with the same small mortgage she had 10 years ago. She never cashed out knowing she could not afford the higher payments.

Today she is stuck in that house... Boo Hoo... And she will not sell for less than she paid for it because she feels she would lose money. It is clear that she really only has 50,000 invested and has 500,000 to play with if she were to sell it for less than her asking price.

Even if she took a loss on this house she did well over the last 10 years.

[OverIt]

"would stay put, rent the house, leave it vacant, etc., and wait for the market to bounce back -- which, historically, it always does"...

Historically speaking we are in uncharted territory.

What we are doing is breaking with the natural ebb and flow of price fluctuations and riding a historic nosedive into historic price drops which will probably alter the historic mean of housing prices for the next decade (possibly).

There's your history lesson.

[tarbubble]

I have lost all hope of being able to sell our south OC townhouse (which we bout in 2002 and now rent out) for at least 5 years. If we sold it now, we *might* break even. Renting it out, we break even (with the occasional minor repair pushing it into the red). The house we are renting now is a 3/2 for $2k a month. I have been constantly telling my antsy friends who want to buy now to keep being patient; thankfully most of them are listening. I know that as a homeowner I'm shooting myself in the foot, but I can't honestly tell my friends this is a good time to buy. We have decided that unless we can get a 17-1800 sf 4/2 SFR for the equivalent cost of renting, we won't bother buying at all, as we'd like the flexibility to leave soCal within the next 5 years. So yes, I am officially out of the closet as a market-timing vulture.

[save your ammo]

Hey, Annette. Where's my posting of about 2:00 PM,
today? I hope the truth isn't too strong for you?
Peter Viles doesn't seem to mind the hard reality... perhaps
because he didn't buy 2004-2007(?)
Are you a bubblehead supporter?

[shockg]

Market timing vulture? You have lots of company here.

[tarbubble]

oh, shock, i was waiting for your snark. thanks for coming through for me.

[Inland Empire]

Zillow will also place your home in a neighborhood its not in, give it interesting "demographics" that don't match reality, compare apples to lemons and other interesting things to make their point.
Case in point - I know of a house in an "exclusive" neighborhood in the IE. I could name three famous families who have lived there and you would all recognize their names (one still lives there). This area is made up of large, custom homes with views of the city. Most of the people are over 40 years old, married and seem to own businesses, have good jobs or trust funds. Zillow has this group lumped in with the 1950s tract houses nearby but not in this area. It has the demographics listed as people who do not resemble the residents either ethnically or financially.
Zillow may have some redeeming aspects and I am sure that lots of people own homes that have decreased in value - probably 99% of the homes out there have. But Zillow is not the be all end all of accurate information.