Tuesday, August 18, 2009

Are Home Owners Being Realistic?

A new survey by zillow.com, an online real estate services company, shows that 81% of those polled believe that their house will not decline in value over the next 6 months:

"homeowners are more optimistic than ever about the future values of their homes, with 81 percent of homeowners believing their own homes' values will not decline in the next six months - the highest percentage on record since the first quarterly Homeowner Confidence Survey, which was fielded in the second quarter of 2008."

Things That Make You Go "hmmmm"

Clearly homeowners still have their heads in the sand and are either unwilling to look at the facts of the marketplace or they are being misled by the flurry of positive data-spin and perception management being proliferated by Wall Street, the National Association of Homebuilders, the National Association of Realtors and the Government ("trust me, jump on in - the water is perfect").

For anyone who is hesitant about the future direction of housing prices, please refer to this post of mine from a few weeks ago:

Housing Values: Look Out Belowwww

The other factor lending slight support to the mid-price range of homes right now is the $8k taxpayer subsidization of first time homebuyers down payments (the FHA now lets a home buyer apply the $8k tax credit to the down payment). Let's see what happens to home prices if Obama takes away this wealth transfer payment...


  1. It doesn't surprise people that are still confident in their homes price maintaining value.

    Those mortgages are due for resetting after the Fed will stop quantitative easing.

    Once the Jumbo/option arm loans reset we will see the next leg down.

    I think the administration is beginning to realize that, regardless of the subsidies, home ownership is not a realistic option.

  2. I doubt Obama understands this because he doesn't understand finance at all (remember his "stocks have a low profits-to-earnings ratio" comment?). Larry Summers may understand it but he doesn't care. when Obama appoints him to replace Bernanke, he'll really crank up the printing press.

    It's not just mortgage resets/recasts that are screwing homeowners, it's unemployment as well. The pay-option mortgages just make things even that much worse.

  3. They must be reading those articles that the recession is over and that "pending" home sales have gone up last month. Exactly what the hell is "pending" home sale...

    What's scary is that the $8k credit is now able to be applied as down payment for many home sales from the same people that shouldn't have any businss buying one in the first place.

    If you can't put the minimum down payment of 3.5% in cash w/o using the tax credit, you shouldn't be buying a house.

    When the housing market tumbles again, those who could barely afford a house will be hit the hardest when their home values decline.

  4. Harvey, even 3.5% is too low for a downpayment. LOL. Now GNMA is offering 125 LTV mortgages. The Government has shifted the old subprime machinery from CFC, WM, FNM and FRE to GNMA and FHA - to be guaranteed by you and me.

  5. The cycle will continue, by making those loans backed by the gov't seems to be the only way they got banks to loan out money because w/o that they wouldn't have.

    It's funny, don't they want to banks to avoid making the same mistakes that got us into this mess.

    The gov't also wants consumers to increase their savings yet they are enticing them with free money for a new houses and cars.

    Great way to spur the economy! Why not just give out free money to everyone.

  6. re: why not give free money to everyone


    Because they're too busy giving free money to the banks and CEO who's run them