Homebuyers Still Expect Appreciation

“More than 42% of prospective homebuyers polled by Zillow believe home values will appreciate by 7% annually in the years ahead.”

Seriously? Apparently so…this according to the recently conducted poll of 177 people who said they were planning to buy a home within the next three years.

“It’s troubling that we’re still in the midst of one of the worst housing recessions in history, and yet prospective buyers continue to have such high expectations for home value appreciation,” said Stan Humphries, chief economist at Zillow. The findings in their survey were most troubling because even in a normal market, home prices only appreciate between 2% and 5% per year, according a 2005 study completed by Robert Schiller, founder of the Standard & Poor’s/Case-Shiller home price index.

I think we all need to dispense with the idea of even 2%-5% appreciation – especially given that was determined in a study several years ago and before the collapse of the market. I advise my clients to buy a home to enjoy, live in and consider the numerous other than financial benefits; breaking even is success until things settle.

According to Zillow, the prospective buyers did show a knowledgeable grasp of the process. More than 65% of those surveyed answered questions correctly more than half of the time. I don’t know that I agree with those results showing a “knowledgeable grasp”; I think that shows the potential for disaster for many of these buyers unless they study up on the home buying process. 

Roughly 41% of respondents believe purchasing private mortgage insurance is mandatory, no matter the down payment. Typically, lenders require PMI when less than 20% down is given.

And 56% of those polled said appraisals determine whether a home is in good condition, which is something an inspection does.

Nearly 50% of those surveyed said a prospective buyer owns a home as soon as the contracts are signed, when in fact the purchase and sales agreements kicks off the closing phase, which can be lengthy.

This should ring bells for both the buyers out here as well as agents; both have things to ensure. Buyers need to get educated on the major steps, particularly mortgage application and approval, how to review and apply data and the purchase process in general. Agents must ensure that their clients understand every facet of the process and have reasonable expectations of success. The idea that 42% of buyers expect substantial appreciation in the near future is mindboggling to me and demonstrates that we agents should continue to lay out the pros and cons of home ownership.

And you buyers – you better make absolutely certain that you’re dealing with experienced agents that know the market. During this meltdown fingers are being pointed everywhere except back at owners; no one is forced to the closing table at gunpoint. Do your research, understand the process and know what owning a home requires. Qualify your agent by asking 7 Simple Questions and know what constitutes success before you begin. Failure to do so will come back to bite you….hard.

The Zillow article is HERE