Survey Says?¡?! Owning a house is "Dumb"


I was riding high in April, shot down in May. Watching that mighty river of real estate sentiment, Zillow.com, I found recently that my accidental-landlord house in Virginia had picked up a cool 15 percent in value since January. 

Why? Sentiment, baby, sentiment. With no properties for sale in the immediate area, I was getting the benefit of the Beltway real estate recovery in all its theoretical glory. I could actually calculate that the place might get back up to my closing price sometime around the year 3000. 

Then some dirty dog a few doors down put his place on the market, priced to sell, asking way below my current zestimate. Now the whole neighborhood average is screwed. Try telling Zillow how that other person's asking price shouldn't count: Does that schmuck have a fully wired detached shed with both storage space and an office? A backyard gazebo? A quarter-acre lot? A tastefully redone basement? No way! But do they listen? I'm 18 percent off my purchase price now, all because somebody is actually trying to sell a property rather than blowing gas about the recovery. 

This is the kind of mischief that results when you put consumer sentiment to the iron test of the market. The National Association of Realtors® keeps claiming there's never been a better time to buy, but nobody believes it anymore. 

At Calculated Risk, the incomparable Bill McBride has measured housing hate for a while now, and he has some interesting new information from Trulia and RealtyTrac: A survey indicates 54 Percent of Americans believe real estate won't recover until 2014 or later. "The evidence was anecdotal, but it was not uncommon to hear people say owning a home was 'dumb'," McBride writes in reference to the real estate busts of the 1970s and 1980s. The current bust long ago exceeded both of those, and so has the anti-real estate sentiment: 

Clearly there has been a sharp shift in when people think the housing market will "recover". Expecting a recovery is somewhat different from asking when people will want to buy, but I think they are somewhat related—if non-owners think the market won't bottom for several years, they would probably also say they won't buy soon too. Just a little more evidence of a shift in sentiment…

Claiming to know the sentiment of any collective, let alone one as big and various as The American People, is way dumber than owning a house. And surveys of opinion about purchasing are superfluous at best: If you want to know how people feel about an asset, all you need to know is what they pay for it. 

Still, because buying a house requires a lot of time and preparation, buyer sentiment may in this case make some sense. The best way to bring back the house-happy America of yore would be to let prices fall to market-clearing levels, without benefit of any HAMPS or TARPs, Fannies or Freddies. Now more than ever, this is a heretical notion. As Rep. Brad Sherman (D-California) explained while supporting exorbitant FHA loan guarantees, "The economy of Los Angeles would tank if prices fell another 50 percent."