Thursday, July 16, 2009

Most Homeowners Optimistic (Or Oblivious) About Home Values

A study by the University of Chicago and Northwestern University found that only a quarter of Americans believe that their homes will lose value in the next year. I find it quite surprising that American's have so much faith in the short-term growth of real estate, despite the historic housing crash we are currently experiencing, and the record number of foreclosures. Perhaps the reason behind this optimism is similar to why most Americans think they are better than average drivers. The following post from Mortgage Roadmap, has more on this story.

Maybe there is something to that old "American Dream," after all. How else to explain that even as the residential real estate industry suffers through a catastrophic slump, U.S. residents still profess faith in the value of housing?

You'd think that most homeowners today — and potential homeowners — would have a rather dim view of housing in general. But a new study by economists at the University of Chicago and Northwestern University show the opposite. The study, which you can read about in this story in the Wall Street Journal, shows that just a quarter of U.S. residents expects the value of their homes to drop in the next year.

That's a big improvement from six months ago, when almost half of all survey respondents said they expected their home prices to fall.

Some respondents even said that they thought the value of their homes would rise in the next year.

What accounts for this optimism? There has been some good housing news lately. Home sales rose during the Spring. But when you compare the number sales of this year to the number last year, there's still a big drop. Housing prices, too, have been slowly inching upwards again. But again, home values are far lower now than they were just one year ago.

Maybe it's in our nature to be optimistic. Or maybe we're all taking a long-term view. Historically, housing prices have risen. You just have to hold onto your house long enough. During the housing boom, people bought homes and then tried to sell them in a year or two for big profits. That's no longer a possibility.

This is actually good. Housing was never meant to be a get-rich-quick scheme. It's an investment that takes years to mature and pay off. But if you're patient, and if you can wait out any future housing slumps, you should make a solid profit when it's time to sell your home.

This article has been republished from Mortgage Roadmap.

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