NEW YORK - U.S. homeowner confidence shrank in the fourth quarter as attitudes moved more in line with actual market prices, real estate website Zillow.com said on Thursday.
Homeowner confidence fell to the lowest level in seven quarters, with just one in five respondents believing their own homes' values increased during 2009, according to the Zillow Q4 Homeowner Confidence Survey.
In reality, 28 percent of homes rose in value nationally in 2009, according to Zillow's Fourth Quarter Real Estate Market Reports.
That resulted in a Zillow Home Value Misperception Index of negative two -- the closest to zero on record since Zillow introduced the index in the second quarter of 2008, when the index was at 32.
A Misperception Index of zero would mean homeowners perceptions' were in line with actual values. A negative Misperception Index indicates that homeowners are overly cynical about their own homes' values when compared with reality.
This was the first time the national index was negative, Zillow said.
One year ago, 47 percent -- or nearly half -- of U.S. homeowners believed values in their local market would decrease in the next six months. But when asked about their own homes, 30 percent, or fewer than one in three, of those surveyed 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 expecting their home will lose value.
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, Stan Humphries, Zillow's chief economist, said in a statement.
But almost three times as many people believe their home values will increase over the next six months as believe it will decrease, a level of optimism that is likely to outpace actual performance in the near-term, Humphries said.
Given recent news about the stabilization of home values in some markets, I can see why homeowners are so optimistic, he said. 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.
We're not out of the woods yet, Humphries added.