Zillow, the Seattle-based company that collects data on home values throughout the country, has released results of it's homeowner confidence survey conducted during the 4^th quarter of 2009.  Zillow found that only 20 percent of the 2200 homeowners surveyed felt that their home's value had increased during 2009 while, based on its own data, Zillow believes that 28 percent of homes nationally had appreciated in value during the year.

Based on this response, Zillow assigned a negative two score to its Home Value Misperception Index where an index value of 0 would mean that homeowner's perceptions were in line with actual values.  The original index when the survey was first conducted seven quarters ago was 32.  Last quarter the Index was at 10 and one year earlier it was 11. Zillow interprets the current index to mean that homeowners are "overly cynical" about the value of their own homes.  Perception was most out-of-line with reality in the Northeast where 22 percent of respondents felt that their homes had appreciated during the year where Zillow's figures put the actual number at 42 percent.   

Nationally, exactly one half of respondents felt that their home's value had decreased over the year.  Zillow's figures put the actual decline at 65 percent.  On a regional basis, the Northeast had an actual decline of 49 percent while home owners' perceptions were at 46 percent; in the Midwest and the South the actual figure was 64 percent, the perceptions were 46 and 49 percent respectively.  73 percent of western homes decreased in value while 62 percent of respondents felt their own homes had lost value.

Zillow said that the results of it's survey demonstrate the "not my home" sentiment, which was once prominent among American homeowners, has faded.  One year ago, nearly half (47 percent) of homeowners believed values in their local market would decrease in the next six months. However, when asked about their own home, fewer than one in three (30 percent) believed their own home's value would decrease. Now that gap has shrunk, with 22 percent of homeowners believing their local market will lose value over the next six months and 14 percent believing their own home will lose value.

Where homeowners appear to be most out of touch with the reality of the market is in the numbers who felt there had been no change in the value of their homes.  Nationally 30 percent felt that there had been no change where the reality, according to Zillow, is that prices have been stagnant in only 7 percent of home values.  These numbers were remarkably stable across regions - between 26 and 32 percent felt there had been no change while the actual figures were 6 to 9 percent.

When asked to look forward, 38 percent of national respondents think their home will increase in value over the next six months; 14 percent think it will decrease, and 47 percent see it remaining the same.  The percent expecting an increase was virtually identical in every region.

The large number of homeowners who view prices as having been stable over the past year and expect no change in the coming six months make it difficult to assess whether the results show unwarranted optimism or insufficient pessimism.  However, Zillow chief economist, Dr. Stan Humphries, said in a press release, "Homeowners are finally succumbing to the notion that, in most areas, declining home values over the past year are no longer the exception, they are the rule.  Almost three times as many people believe their home's value will increase over the next six months as believe it will decrease in value, a level of optimism that is likely to outpace actual performance in the near-term.  Given recent news about the stabilization of home values in some markets, I can see why homeowners are so optimistic.  However, home values in many markets are still under substantial downward pressure from high levels of foreclosures and we don't believe we'll see a definitive bottom nationally until the second quarter of this year."