Call it hubris, or just plain denial, but according to Zillow’s Q2 Homeowner Confidence Survey, most U.S. homeowners consistently overestimate the value of their own homes, despite empirical evidence to the contrary.
Specifically, the survey found that 62% of U.S. homeowners think the value of their home has either increased or remained steady; but, in actuality, 77% of U.S. homeowners have suffered from declines in home values.
It’s tempting to dismiss this as other folks just needing a reality check, but the truth is that it’s human nature to dismiss numbers and statistics as affecting other people, and to discount the danger of abstract threats until they more or less smack us in the face.
What this means for the housing market is anyone’s guess. Personally, I think it still has further to go in its downward spiral. Not a cheery thought, but the Zillow survey indicates that many American homeowners seem to think it’s business as usual, for them at least.
When ugly reality hits some of these people, as it inevitably will, there are going to be some mortgages in trouble. There are smart companies out there poised to make a profit by buying up these mortgages for a song. Reselling them for a higher price once the current crisis passes will net these companies serious profits.
As an investor whose funds may be performing sluggishly, you should consider investing in companies that can maximize the potential profits from these distressed accounts.
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