A quarterly survey of homeowner confidence by valuation and listings site Zillow found many homeowners are eager to list their homes for sale if they see signs of a turnaround, potentially unleashing a "shadow inventory" of homes that could put downward pressure on prices.

Although most homeowners believe their homes have lost value in the last 12 months, even more seem to think that homes prices will stabilize or bounce back in the next six months, Zillow said.

The survey found 60 percent of homeowners think their own home lost value in the last 12 months. Zillow said its analysis of market trends reveals that 80 percent of U.S. homes lost value in the last year.

While those numbers suggest some homeowners may be out of touch with reality, Zillow’s "misperception index" — which gauges how closely homeowners’ perceptions track with market reports — is the lowest it’s been since the surveys began last year.

Zillow’s misperception index registered 32 in the second quarter of 2008, when 62 percent of homeowners believed their home values had increased or held steady in the last year, but 73 percent of homes had lost value.

The misperception index shrunk to 16 in the third quarter, 10 in the fourth quarter, and registered five in the latest survey. An index of zero would mean homeowners’ perceptions were in line with actual values.

Homeowners in the West were the most realistic, with a misperception index of two, while those in the Northeast were farthest from reality, Zillow said, with a misperception index of 11. …CONTINUED

If many homeowners are coming to grips with the magnitude of the downturn, they also seem to be ready to call a bottom.

Half of those surveyed believe their home’s value will hold steady during the next six months, and one in four expect it to increase. Asked about values in their local markets, 26 percent expect price increases in the next six months and 37 percent expect prices to stabilize. Only 37 percent thought home values would decrease.

Stan Humphries, Zillow’s vice president of data and analytics, said the survey shows homeowners are "still pretty starry-eyed" about the future. While three out of four homeowners believe that their own home’s price will increase or be flat over the next six months, "there are few markets we expect to perform this well," Humphries said.

Expectations that a bottom is forming could lead would-be sellers who have been holding off from listing to put their properties on the market. This shadow inventory could put downward pressure on home prices, Humphries said in a press release.

The survey found 30 percent of homeowners were at least "somewhat likely" to put their homes on the market in the next 12 months if they saw signs of a turnaround.


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