Years Into Downturn, Homeowners Accept Declining Value

Homeowners are often a sunny (we won't say "irrational") lot that tend to believe their homes are more valuable than they really are. Year after year, in survey after survey, they make it clear that they regard a two-room shack as a Swiss chalet, their mini-McMansion a bottomless piggy bank, and their remodeling spend as an all-upside investment. And, despite evidence to the contrary, many have believed that somehow, some way, their particular address is immune to falling home values in their zip codes.

Looks like homeowners are getting a dose of reality. According to a new Zillow survey, they are finally admitting what the market's told them for a few years: Home values don't always rise steadily, and may even decline.

Indeed, like a stock or mutual fund, a home's past performance (say, through 2007) doesn't always indicate future results. Homeowners, it seems, have gone bearish. More now expect their homes' values to fall.