Homeowners still engaging in "Homeallucination"

According to a recent AP story, many homeowners throughout the country are still engaging in what economist Chris Thornberg of Beacon Economics has dubbed "homeallucination." It means that although home values around your neighborhood have fallen, somehow you think yours is different. Special. Somehow immune to declines. In other words, what your therapist might gently call "denial." From the story:

Despite dismal housing headlines and reports showing falling prices nationwide, owners in some once-hot areas still believe their home is gaining value or at least holding its own. And by hanging onto too-high expectations, sellers are unwittingly keeping the market from finding a bottom...

A recent Coldwell Banker report showed that more than three-quarters of its real estate agents surveyed said most sellers have unrealistic initial listing prices for their homes.

Likewise, an unscientific study released last week by real-estate Web site Zillow.com found that half of homeowners polled think their home's price has increased or stayed the same in the past year.

"We expected people to get a little more in touch with reality especially over the summer, because you couldn't turn on the TV or read the newspapers without seeing that home prices are falling," said Amy Bohutinsky, a spokeswoman for Zillow.com. "It was very surprising to see this kind of disconnect."...

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