Wednesday, February 11, 2009

Borrower Optimism Bias

Lansner reports on a Zillow survey which finds that, although homeowners are aware home market values have declined, they underestimate the extent the decline applies to their own home:


What’s most interesting to me is the future outlook:

Most homeowners seem to believe the worst is over. Seventy percent think their home’s value will either increase or stay the same in the first six months of 2009. Zillow researchers call that “a curious optimism” and say the year will not play out that way.

I’ve previously posted on why borrowers continue to support properties which currently have no equity. I think this “curious optimism” is a big part of the explanation.