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Wednesday, July 20, 2011

Homeowners in Denial About Value of Properties

Purchasing a home tends to be an emotional buy, not an investment buy.  That's why income properties fell faster than home prices.
Homeowners, especially those who bought their houses after the real-estate bubble burst, are still having trouble accepting just how much the values of their properties may have fallen, says a new report from the real-estate site Zillow.
Current sellers who bought their homes in 2007 or later, an analysis of the site's home listings shows, are overpricing their properties by an average of 14 percent.
Sellers who bought their houses before the bubble, and those who bought during the big run-up in home values, also are overpricing their homes, but not by as much. Those who bought before 2002 are pricing their homes roughly 12 percent over market value, while those who bought from 2002-06 price them about 9 percent over market value.
In the analysis, Zillow compared the asking price of one million homes for sale to the homes' previous purchase price, then factored in the change in the Zillow Home Value Index for the respective ZIP code, to determine an estimate of that home's current market value.
Some home sellers are not even factoring in Comparable sales.
Of course, some sellers who owe more than their house is worth are limited in how low they can price their home because selling for less than their mortgage means they'll have to negotiate a short-sale with their bank. "They're hoping against hope that they can sell at a higher price," Mr. Humphries said.
But others are simply faced with a reluctance -- understandable, to be sure -- to sell the house for less than they paid. "They could price more aggressively, but there's a psychological hurdle," he says. "They don't want to realize a loss."
Humphries foresees home values continuing to fall through the middle of next year for a variety of reasons, including persistent unemployment, a significant pipeline of homes in foreclosure, as well as high rates of homes with negative equity, which means many
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