According to a new survey from Zillow.com, Americans are totally out of touch with reality when it comes to their homes. 62% of homeowners surveyed said they thought their homes had appreciated in value over the past year. In fact, only 19% of homes in the US increased in value, and 77% actually decreased in value. (5% stayed the same.)
Stan Humphries, Zillow’s vice president of data and analytics, said in a statement that the gap between what consumers believe their homes are worth and actual values is due 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.”
“Although many homeowners may believe the worst is over, we think this level of optimism is out of sync with actual market performance,” Dr. Humphries said.
The survey also found that more than 90 percent of homeowners report that foreclosures have occurred in their local market already.
Are you in denial about the value of your home?
Zillow Finds Homeowners Confident in Own Home Value [Wall Street Journal Development Blog]
(Photo: Joy of the Mundane )
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The tax assessor says my house is worth less than I paid for it. I have improved the house (new roof, new carpet, paint, and trim) and yard (new grass and a vegetable garden in the back, new landscaping in the front) and am happy that the house’s taxable value remains low. Quality construction, contemporary interior finish, and an attractive lawn will add value to my home that tax assessors may have little time to consider.
My landlord is trying to sell my house for $195k. I’ve talked to all my neighbors and they just laughed at that price. He paid around $179k for the house. Zillow says the house is worth $175.5k. I’d say that zillow is accurate because there have been NO improvements done to the house since this landlord purchased this house. My landlord also purchased this place 2.5 years ago. Also, the basement got damaged during a flood and tornados ripped through the area 3 days ago.
@Aladdyn:
Don’t know about elsewhere, but in my hood our neighbor’s house didn’t appraise for the contract price and they had to lower the price to what the appraisal was – otherwise the bank wasn’t approving the loan.
@Aladdyn: good point, kinda forgot about that.
I get a daily email for listings in my area, just so I can keep on top of the prices. I’ve noticed that single family homes in my area have remained about the same or a little higher, but townhouses have gone down. My guess is because if it costs just a little more for a single family home, people will buy them instead
I had to check Zillow, of course, and was surprised to see that the information for most of the houses on my street was incorrect as far as the numbers for bedroom, bathrooms and square footage go. Ours is listed as a 2/1 when it’s a 3/2 and has been for years. The price wasn’t far off what we paid, though, which was still substantially less than what houses appraise for in our neighbourhood.
Anyone know where zillow gets their info? They claim the house I grew up in has no bedrooms, and I remember sneaking out of mine frequently.
A house across the street from me tried to sell their house for over a year before taking it off the market and renting it out. They started at a highly inflated price for the neigbourhood, but close to what Zillow had because technically they had more square footage then many of the other houses around them. But square footage can’t make up for an awkward layout and outdated kitchens and bathrooms. Over the course of the year they reduced the price about $100,000 and still couldn’t sell it. (And it was still higher then what any other house in the neighbourhood had sold for) If they’d started at the reduced price at the beginning of the year I think they would have been able to sell it easily.
@Braff: Ha! Some of those are hilarious. When we were closing on our house, our realtors (ours and the sellers) were killing time waiting for the broker and told us some great horror stories.
Like the family that had Tie Dye walls in the kitchen and living room and refused to paint over them. Maybe leaving some tacky decorations and paint up worked at the peak of the bubble but not in this market.
There was also the sellers who didn’t want to sell to “insert minority here”. They didn’t understand why that stance was illegal and our realtor decided that they weren’t worth working for.
Hm. Our next door neighbor recently sold their house (identical model, no improvements) for $405k. We bought ours seven years ago for $240k. And we’ve made several significant improvements. I’m guessing we could get $440k if we timed it right.
I hope Zillow’s not too far off the estimate. It only means I depreciated a little bit! Since 2004. Lots of improvements, so given SE Michigan’s current state, I don’t feel bad, and (knock on wood) don’t plan on leaving.
The way zillow works is that it takes a median number (not average, or actual assessed values from local governments) of the prices of sold houses in your area. So with the current waves of foreclosures and short-sales across the country, it’s only going to drag the numbers down even further. The actual value on my house is higher than what Zillow indicates simply because I live in alifornia, and everyone and their mothers are foreclosing their homes. But it is very upsetting to see our house is upside down $100k after 3 years.
Holy shit, Zillow’s estimate of my home value has reached new heights of absurdity, estimating its value at NEARLY DOUBLE what we paid for it four years ago! I don’t think I actually believe their sales figures for homes in my neighborhood — those are ABSURD numbers.
The county tax assessor believes my home has risen in value by a small and reasonable amount. I’ll believe him. (We weren’t in an overheated market, so didn’t crash.)
A house across the street from me just sold in foreclosure, but that was because the owners got into drugs and stuff, not because of a bad mortgage. On the plus side, the foreclosure sale means I have a lovely new neighbor in his early 20s for whom the actual price of this neighborhood wasn’t affordable, but the foreclosed price was, and he’s very handy so making th eplace lovely!
Maybe people are just looking at their TAX appraisals! UP UP UP!
I have heard this rule of thumb about the real value of a house – 150 to 200 times what you can rent it for, depending on how desirable the neighborhood or area is.
Here in the SF Bay Area, I rent a house for $2000 a month – it’s worth (or will be when things settle down,) between $300,000 to $400,000 month, probably closer to $400,000. It used to be worth probably $800,000.
It has to do with return on investment as a rental – not as a pyramid scheme or tulip mania instrument. Banks will want to loan you the money to buy it, but you have to have enough down payment to cushion the loss as it continues to fall in value.
Zillows’s numbers have always been wildly inaccurate at best. In St Louis (where housing prices were up a whopping 20% at most at the peak of the bubble and have not come down all that much either) they usually seem to be anywhere from 30% to 60% above current market (I base this on some homes that have actually sold recently in a my neighborhood).
I checked our house price this spring and we were still up 50k from what we paid for it three years ago. Houses here are incredibly cheap so that is a lot of money. What I find slightly amusing is that there are lots of fly by night home builders who got into this during the bubble and were building new homes like crazy. Now some of them are doing “fire sales” on these new houses trying to get themselves out of debt to the bank. I saw one drop house prices $100,000 this spring. Another one is doing the same thing now trying to unload all of his new houses. Used houses are still staying pretty high by comparison. The average home price around here is about $150,000
I live in a condo on a lot where there used to be a house and it hasn’t been updated…after 2 years.
Zillow is only as good as the data that goes into it.
IE, if there haven’t been a lot of sales in your area, it will be highly inaccurate.
Not one bit! My home has depreciated in value by 31%!
@Youthier: Gotta love nosey neighbors who equate their own limitations for staying in the market with others ability to do so. We just sold our home in one of the WORST markets there is. Made many mistakes when buying it a few years back…house much nicer than most in the neighborhood, bad school district (we didn’t care), crime we didn’t know about until after moving there. We HAD to get out of there asap…so we bought a house an hour away in a nice area, got the old house ready to sell, and boom, the media went full blast with the housing market here and “nothing was going to sell.” To us, we were just grateful to get out of there, and planned to hold strong with our price regardless, because we knew that we had a great product and the market would eventually have to go back up. We weren’t under any delusions, and knew that before we even put it on the market it needed to be painted in neutral colors, be immaculate, etc. I’m in shock how many dark purple walls, and country clutter decorated kitchens are on the market. People just don’t share the same eccentric tastes…they need a blank slate that they can envision making their own.
ANYWAY, all our nosy neighbors thought we were on something, and projected that we should be desperate and let the vultures take advantage and steal our equity for nothing, just because the market is bad now. We fully envisioned at least 2 years the way the talk was, and voila…8 months later (which is a mere blink here) we not only sold it, but sold it for a mere $1,000 less than asking price. We just laughed at some of the feedback, though…people just assume that everyone in America should just give away their houses because the market is bad and foreclosures abound all around. Well…you get what you pay for with a foreclosure house, but we knew we had a home that had plenty of historical character, which was still a STEAL for someone looking for such a place. Not everyone bought houses they couldn’t afford and should jump at any crumb offered if they can objectively assess what they have (and not what they “need” if they got in too deep). By the same thinking, neighbors shouldn’t assume that their situation is the same as others or that their property is automatically comparable just because it is in the same block.
PS– Mortgages for bad credit people still abound (fortunately for the sellers, unfortunately for our economy). Sad that credit worthy people are getting the “business” while others are still have boatloads of money handed to them that shouldn’t. Thanks “gift” programs and FHA borrowers! Funny our buyer had NO cash to put down on a house r anything but got an open-ended mortgage that enables her to keep borrowing more to make improvements (on a house already way OVERimproved for its neighborhood)…and already started doing so. Argh, our poor house…hopefully it won’t be neglected when she forecloses. You know what they say about suckers….Oh well, it was her decision.
BTW– Meg Marco should get a Consumerist gold star or something (at least a kitty treat from Morrissey). I skim the topic titles and just click on the ones of interest, and almost every time it is a Meg Marco addition, plus commentary (not just linking off other sites, but thought involved/interaction with the subject). Nice job!
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@incognit000:
Just in case you were serious, the sum of 101% (19 + 77 + 5 = 101) is probably because of rounding. For example: 18.5 + 76.5 + 5 = 100
ummm… glad I moved to Canada, no loss of value here. I just sold my house in the dead of summer in 1.5 weeks for $250k more than I paid for it in 2004…
OH, btw, a must-see if you haven’t already: [lovelylisting.blogspot.com] extremely hilarious.
@Braff:
No they didn’t force those people. But they approved them for loans they knew they weren’t going to be able to handle. It sounds like a stupid idea to begin with.
You wouldn’t personally loan money to someone you know, yet alone a stranger, full knowing that they would not be able to pay you back. Why would a financial institution designed to make money do the same? Just simply idiotic.
@mariospants: OMG that’s an understatement! Awesome link, lol!
My house is almost certainly worth more than we paid for it a year ago, but I don’t know if it’s worth more than the sale price plus the money we’ve put into renovations.
Appraisals are generally $300 to $400 for a SFR
I wonder if the way in which people over-value their homes is related to tax assessments. My family’s home in rural Pennsylvania (where the market is not competitive and prices are very low) is valued at $42,000 when it comes to calculating their property taxes. They feel that they probably could not sell it for more than $36,000 (and they’d be hard-pressed to get that much).
I wouldn’t blame obliviousness entirely for a tendency to overestimate.
I live in the Dallas area, which is one of the few places that hasn’t seen a significant decrease in home value, mostly because we never had a significant increase. Zillow and my tax assessment are pretty close in value and show an appreciation of about 40k in 3 years.
The thing is, I love my house. I never would have bought it if it was not what I wanted. I’m not planning to move or sell for quite some time. Most importantly, I’m not planning to get rich off selling my house.
My home has increased in value by by about 2% since I purchased it in November 2007. The house I sold is up about .5% (and about 4% from the purchase price I sold it for, which was roughly double what I paid for it). This is Northeast Florida (Jacksonville & surrounding areas)..I hear the only people losing value are McMansion owners. The house I sold was a 2/1 bungalow and those are in pretty good demand now, my new house is a 3/2 ranch house. A little bigger than I need right now, but not too bad.
@MorrisseyTheCat: Yeah, you’re right. Not everyone is the same.
But the people that I was referring to are morons with no common sense. I could give you about a 100 more examples.
Zillow is a scam. According to them my house doubled in value since I bought it last year. $250K -> $500K. (No, I don’t live in or near the city)
It often changes by $50K in a day!
My neighbor is trying to sell their house according to Zillow. It’s been a year and his “For Sale” sign is now growing moss on the north side of it.
@Youthier: Oh, I a sure… When our house was for sale we spent a lot of time looking at pics on realtor.com of the “competition,” and I just cannot believe what SO MANY people are even thinking. I kid you not, PINK dining rooms were a recurring theme. A lot of the places (with seemingly nice potential) looked like crash pads where 15 people could have been living. One thing that really irks me (and this was brought up on the show “Flipping out,” is when people downright lie or seriously exaggerate aspects of the home to get people in there to look. That is SO not the right approach, because it just p*sses people off and they want nothing to do with the house…wastes everyone’s time. I have looked at a house that actually had ZERO legitimate bedrooms or full bath. One on the first floor seemed no different than a closet, and the ATTIC held the “master bedroom” and “full bath”. Mind you even then, the toilet and bathtub were in the middle of the whole attic setup, no walls or doors. Sure made it seem great online though…what a waste of time
I guess I’m in the lucky 19% because according to Zillow our house value has increased 11% in the last year and a whopping 62% in the last 5 years.
Zillow used to wildly overvalue our property but with the formula rejigger they did a while back it actually seems to be pretty accurate for our area now.
I remember someone showing me zillow when I first put my house on the market and how it had the value of my house at almost twice what it was really worth (and finally sold for). They aparnetly forgt to average in all the sold for 50k at auction houses next to us which brough the value of the whole area down.
A home is not an real estate investment, it is a purchase on credit. It is no different than buying a car and you should not expect the value to increase. Why on earth would you expect something that is getting older and more worn to be worth more than what you paid for it?
It doesn’t matter what your home is worth after you have purchased it. It doesn’t change what you owe the lender. The only thing that matters is that you paid what you feel it is worth. Someone else may be willing to buy your home for more than you did, but the intrinsic value of the home itself is really only replacement cost.
The only portion of your home that will increase in value automatically is the land itself. This is due to laws of supply and demand. There is limited land, so the value should generally increase. Of course, the value of the structure may decrease and cancel out the property value.
People always think what they own is worth more than it may really be because there is an emotional attachment. Just look at cars for sale. Anything you are trying to sell is only worth what someone else is willing to pay for it. Period.
Just bought a home and spent a lot of time looking at listings and sales. People are definitely in denial big time. Those who have to sell are dropping their prices but many (most?) are not and those homes just sit around with no action. As for Zillow they definitely error on the high side but what do you expect, they want people to visit their site so of course they are going to give you “good news”.
Hey… Zillow’s estimate is twice what we paid for it. Of course, we did an addition and finished the basement, and it doesn’t list our new square footage or the fact that we now have five bathrooms instead of three. If I were to sell my home, I would switch out the windows in my office to make a “legal” bedroom and sell it as a four bedroom, five bath house with a workshop addition. I think it would sell for about Zillow’s estimate, but there’s no real housing bubble involved in that.
@ShadowFalls: I agree with that statement. I just think blame should be spread around, not placed squarely on one side… everyone involved was/is greedy. Homeowners, appraisers, mortgage lenders, banks, etc… Some saw a chance to make some quick money and now most are paying because of it.
By the way, I still hear stories of people signing up for Option Arms… and lenders making LOTS of money on them. It is “mind-bottling”…
I paid $87/SF in a neighborhood with an average of $125 (the seller was very motivated). and the house is structurally sound and has no defects. So I think it’s safe to assume that mine will appreciate against what I paid for it.
@fostina1: And mine is worth $30k less than I sold it for last month. Those estimate tools are worthless.
Here in Dallas we have pretty much avoided the housing issue (other than all those Countrywide employees now crowding the job market), but we’re getting close. Our house was in a prety high-demand area (M streets),and we turned a decent profit (bought in ’04), but I’m pretty sure we would’ve gotten the same price last year.
We bought the house as an investment (ie we paid more than we could afford) and it worked out ok for us. But never again.
@MorrisseyTheCat: Regarding the lies, when we bought a house a few years ago there was one nearby that listed “Jacuzzi tub” and when we went to see it there was no hot tub. In the bathroom there was the very same builder bath tub that every house in the neighborhood had with simply a “Jacuzzi” sticker applied, askew.
I get a sickening feeling when I realize that our house is worth about 10% less than what we paid for it and that we have put more than 20 grand into the place repairing it. In our case we needed to get into a decent school district before our kids started school.
@squidbrain: So, obviously, those people don’t HAVE to sell as quickly as those about to foreclose, so if they can afford to hold out until the market comes back up they are SMART to do so….How do you know there is no “action”? Maybe (like us) they had plenty of action, but nothing worth losing their shirt if they can afford to hold off until it either starts improving, or someone clueless about the area snatches it up because it is a bargain compared to what they are used to seeing. Don’t assume you know what people’s intentions/financial situations are….
(This is a totally separate issue from those who put ugly ducklings on the market and expect to make a windfall)
@mzs: lol! I see that jacuzzi thing ALL the time, and 9 times out of 10 it is just a regular bathtub in the bnathroo with a couple of jets. Nice way to antagonize potential buyers right off the bat when they realize what is really going on…
bathroom! eek
Hey anyone live in weird disclosure states? Meaning, like here in Ohio, we had to fill out something that was attached to the disclosure that disclosed our mortgage type and what we owed on it (none/nothing). Is that a new Ohio thing, or is it just something my realtor stuck in there for whatever reason. Seems like it would put a lot of sellers at a seriously unfair disadvantage against the vultures… I found it very odd, but it was the first time we sold a house….
Zillow is useless…2 weeks ago I checked my home’s value and it listed it as $99,900. (I almost had a heart attack because that means it’s lost 1/3 of its value since we bought it six years ago.)
Today I checked Zillow and it lists my home’s value as $165,900. I’m pretty sure my home’s value hasn’t skyrocked $66,000 in two weeks. Especially since I live in the Metro Detroit area, where home prices are plummeting.
If I had to make a reasonable estimate, I would say my home is worth about $20K less than what we paid for it six years ago…which means we are about $12K upside down on our mortgage. Ugh.
I sure as hell hope the market turns around in three years because we’re planning on selling then. If not, I guess we will be forced to stay until in it until we can at least break even.