Perception vs. Reality

I reviewed the table from the study that you quote and the same data could be described with the following statement. "65 % of homeowners believe that their home has stayed the same or decreased in value." It all depends on how you describe the data. In the final analysis, it really depends alot on where you live (ie Toll Brothers tract housing with multiple unsold units vs midtown Manhatten). The psychology also reflects alot of variability in price within single regions and towns. We would all like to think that our homes compare well with desireable homes geographically near us. Also, most of us view our homes as a place to live and do not plan to move in the near future. No-one knows the true value until the home is placed on the market. I would like to think that most of us are basically optimists. ......though some might argue that with this last statement, I too am in denial...........

Homeowners are in denial and getting caught up in the emotional ties they have in this situation. This is the type of thinking that will result in a prolonging of the housing decline. Economic markets (stock, commodities, etc) adjust pricing to bridge the gap between supply an demand. The disconnect here is going to cause unsold inventory to sit on the markets longer, causing a more severe correction when sellers are finally held with no other alternative but to meet the buyer. In essence, chasing the decline down when its too late, rather than succombing to it early at a less severe decrease.

Type your comment here...

Regarding GB's comment:

The data shows 36 percent think their home value increased, 41 percent think it stayed the same, and 23 percent think it declined.

People who think their homes declined in value probably are pessimistic with good reason. But more than 23 percent of homes declined in value last year. So it's the other responses I found interesting.

I think many people are simply too caught up in their families, hobbies, and jobs to have noticed. I, too, might not have noticed the situation if it were not for the fact that I am planning on selling my home this summer and moving to a different town. I know that last year (2007) we were were expecting to sell our home at about 90% of its peak 2004/2005 value. Watching the prices of nearby homes, and what is selling and not, and considering the good and bad features of our home own, I would say we are now (early 2008) down to 80-85% of its peak 2004/2005 value. Had my family not been paying attention, we probably wouldnt believe it ourselves. As my favorite coach says, it is what it is.

Our challenge is now finding a home in this other community where those sellers can also accept the same reality. Since we may not spend much more for a home than what we sell for our home for, its pretty much a wash. But unrealistic sellers (and most of them still are) are bottlenecking the system of home transfers for people who are realistic, such as my family.

The sad part is many people truly believe that their home is more special than their neighbor's. Maybe its the lot, a nice deck, an addition, whatever, most people think their home is more special. I think this is just comfort and love with one's own home. I know that some of my things we did to improve our home are really special/unique, but we are realistic about what features/improvements add what value. Reality is, an asset is only worth what somebody else is willing to pay, no matter how special you think it is.

After reading multiple articles - there is a ton on negativity on this board ! It's really pretty horrble that this is all happening to the market, and to consumers in general. Those of you that are happy about this pain, I feel sorry for you. While I agree that market conditions had become rediculous, this is due to the policies of our government and the large commercial interests in the country, as well as some well meaning, albeit misdirected consumers. I am now 30, and it's pretty sad that what I have seen financially in my life (since being a responsible 23-year old out of college) is an inflated housing market which I bought into, and then invested in. Now, the markets going to be falling and flatlining for the next 10 years. That takes me to 40 (although i guess that's enough time to pay off a new 30-year mortage by the time I'm 70). No one is really safe in this market, and no one knows where it will end or how deep it will go. When people who have done nothing wrong with the subprime mess, or credit card debt, or any other crap start losing their jobs, they may not be able to pay either. That will further depress housing with additional foreclosures. This could become a giant nightmare for everyone - so stop cherrypicking who's screwed and who isn't - we may all be by the end of this thing.

Well, I have cut my price back to below what I paid in 2003. Lots of lookers, one lowball offer, so far. I am also looking for another house and am finding that prices overall are not reflecting the reality. The only houses that seem to be priced for this market are short-sales and foreclosures, which often come with a lot of problems. Sellers still seem to be thinking that what they paid or have in a house is reflective of a current selling price. Market value isn't set by sellers, and a house is only worth what a buyer is willing to pay.

What most fail to see is the domino effect. I am selling a home in San Antonio- which has been pretty much immune from the ups and downs of the 'hot' markets. Its just slow and steady pretty much everywhere in the Lone Star State.

But since Texas is a relocation desitination with company's expanding there (because of the reasonable cost of living), its still hurts our market because folks cant sell their current home to move there. So it delays and curtails their buying power- the result is less activity all the way around and lower prices as houses sit and inventory bloats.

Plus I think Joe average homeowner cant draw the proper context between selling or hypothetically pricing a home in the past. So if thought my house was worth $200k in 1996, I get a market analysis that says its worth $250K in 2008- my frame of reference is that it appreciated, even though in reality it was work $260K in 2007. Without individual data, you are forming opinions on rheteric. So this is art and not science. I think the media loves to stir the pot with things like this...

JBV

At the top of the market the sellers had the advantage and did everthing they could to get the most for their houses as they should, now that the buyers have the high ground and time is clearly on their side one should expect them to squeeze the sellers for every penny then can. I'm looking to move but not at a fire sale price so the lack of interest in my house pervents me from buying someone elses house. Sure must be hard to be an agent or worse the Manger of an office. That has to be really hard right now. I would like to here from some Real estate mangers on this blog.

What I have seen is that people feel their particular town is immune to the housing correction. The perception is that towns like Bedford, Concord, Arlington, etc. are special because they are "such great towns" that people will pay anything to live there. The reality is that in towns with more higher end homes, they are laggin the correction because more affluent buyers are more price elastic and are not pushing for lower selling prices. More affluent buyers are also less impacted by the credit crunch, so the supply/demand curve is different. These towns are also going to follow the correction, but more slowly. The misleading aspect is that in Mass, every town thinks they are a special town. Even towns far out of Boston, more close to Worcester like Westborough, Sudbury or Southborough, think they are special towns immune to the correction. In these towns you see huge pricing variances. Some truly awful houses being put on the market for outrageous asking prices and some more sensibly priced. Over time, reality will take hold in these towns and they will see a drop of around 20+% in prices as most non-biased economists and analysts predict is needed to correct for the bubble.

this type of self-denial of reality from home sellers is prolonging a recession that is hurting everybody in the economy

THANKS ROMNEY.

John K, Please say it for the Daily Kos. High spending is killing MA and taxing you boys out of your competive advanatage. I thought all you hacks were in FL this time of year?

I live in Massachusetts and where my neighbors house just sold in 6 days for about 30K dollars less than they bought it in 2004. That is pretty typical for people who bought their homes in the 2003-2005 years. But as of right now, I believe that prices are pretty much bottomed out. I know that I am not selling my house until this whole thing is over. Alot of people have pulled out of the market because the foreclosure mess, and then the vultures think that they can buy your house for the same price as the foreclosure dump that needs 40k in work. Think again buyers, because after this mess is cleaned up in about 1 year then the prices are going to climb again. The population is increasing and in the northeast the supply isn't that plentiful. So keep waiting all of you buyers because most of the sellers including me are just riding out the storm and we will make a nice little proft off of our houses just as most people who hold on to their houses. In fact, I predict that the home prices are going to fly around here again. Once all the hype stops, just like it did in the 90's. Same thing here. You wait to long, the interest rates will be up and it will be the same thing as lower prices and lower intereset rates. And by the way, this whole housing thing is certainly not the fault of sellers. I think that alot of home prices are more than fair and the interest rate is wonderful, I honestly think that the buyers are the unrealistic ones this time around.