A new survey from ""Zillow"":http://www.zillow.com/ reveals that prospective homebuyers may have an overly optimistic view when it comes to their expectations related to property appreciation and housing value. In the website's recent poll, more than 42 percent of those that plan on purchasing a home in the near future said they anticipated a 7 percent annual increase in their property value during their ownership period.[IMAGE]
The survey examined 177 individuals that predicted they would buy a home within the next three years, and while most of the targets Zillow polled seemed to have an appropriate understanding of the multiple aspects of mortgage loans, there were also some significant discrepancies recorded. Most notably, the unrealistic annual percentage of expected property appreciation was extremely elevated. In a normal market, for example, a rise in home value of 2 to 5 percent per year is the status quo, far below the 7 percent rise in value aspiring homeowners are counting on.[COLUMN_BREAK]
Areas indicating a lack of homebuyer knowledge and education included issues related to mortgage insurance and general confusion about the appraisal process. Forty-one percent of those participating in the survey reported that they believed purchasing private mortgage insurance was mandatory no matter the downpayment amount; when, in fact, lenders normally only require PMI if the downpayment is below 20 percent.
Additionally, 56 percent of people polled thought that appraisals establish if a home is in good condition; however, that role is assumed by a home inspection, as opposed to appraisals. Another portion of the home buying process that borrowers found confusing was confirmation of official ownership. Around 50 percent of those surveyed believed that they own their him upon signing the contract for the house, and many seemed to misunderstand the closing process that ensues following contract completion.
Overall, 65 percent of respondents rang in correct answers roughly 50 percent of the survey queries. Speaking out on the general findings from Zillow's survey, the company's chief economist San Humphries, said, ""It's troubling that we're still in the midst of one of the worst housing recessions in history, and yet prospective buyers continue to have such high expectations for home value appreciation.""
Continuing his commentary, Humphries stated, ""It's great that buyers seem to have a fairly solid grasp of the home-buying process, but ... over-estimation of the appreciation potential will lead many to buy real estate when the time in which they plan to live in the house may make renting a better strategy.""