Zillow Reports Homeowner Confidence Fell in Q2 2010

Zillow reported that homeowner confidence fell in the 2nd Quarter.  Here’s a quick recap of their findings:

– 33 percent believed home values in their local housing market had not yet reached a bottom, while 38 percent believed they had already reached a bottom.

– 28 percent of homeowners said home values in their local real estate market would decrease in the next six months, up from 20 percent in the first quarter.

– 27 percent of homeowners believed their own homes’ values would increase in the next 12 months, 35 percent believed they will stay the same, 12 percent expected a decrease and 26 percent did not know.

And the most telling stat of all, in my opinion:

Despite the increasing pessimism, a large number of homeowners were anxiously awaiting the opportunity to sell.

Indeed, 5 percent of U.S. homeowners said they were very likely to put their home on the market in the next six months if they saw signs of a real estate market turnaround.

Zillow said this translated into 3.8 million homes with the potential to come into the market. By comparison, 5.2 million existing homes were sold in all of 2009.

So, what does this mean for the Charlottesville real estate market?  It’s sometimes tough to translate national surveys and statistics to our local market in Charlottesville and Albemarle County, but here’s my take:

1. Consumer confidence is a huge driver in price.  If buyers are confident that the housing market will recover (or if prices are on the rise), then they’ll talk with their wallets and start buying.  On the flip side, if they are unsure or pessimistic on the market, then they’ll either hold off on buying or will attempt to buy a home at a price they perceive to be market value (not necessarily where a seller sees market value).

2. If 5% of homeowner’s are truly going to list their homes if they see a bump in the real estate market, we may be in for a longer recovery than expected.  Here’s the reason: basic supply and demand is a major factor in the real estate recovery.  If supply of Charlottesville homes for sale all of a sudden jumps as soon as we see a small turnaround, that would increase the amount of inventory of Charlottesville real estate…and thus slow down a recovery.

At this point, this is all theory.  We can analyze and debate it until the cows come home without coming to a firm conclusion.  But it’s good to keep our pulse on the situation.