The Power of Perception: How Do You Interpret Real Estate Market Statistics?

Picture a 16-ounce drinking glass. Then, picture it with eight ounces of water in it.

What you have is a glass that contains 50 percent of its maximum volume in water, right? That’s an easy mathematical model.

Now, let’s see what people think. Some of them will say it is “half full,” while others will say it is “half empty.” The amount of water in the glass did not change, but those people have different takes of what it means. The information remained the same, but their perceptions varied.

Got it? Good. Please keep reading.

Fannie Mae recently (late 2009) did a survey of 3,000 Americans. They did a very similar survey in 2003. In 2003 83-percent of those surveyed thought that buying a home was a good investment, while the most recent survey showed that 70-percent felt the same way now.

So, on one hand it looks like people in 2003 were far more optimistic about home ownership, right? Ok. But 70-percent of Americans are still optimistic. That’s still a lot of optimistic people, especially considering the worldwide economic meltdown of the last 18 months.

And here is the kicker:

In 2003, people were enjoying the sixth or seventh year of recovery after a huge housing market crash that started in the late ‘80s and continued through about 1996. So, of course they were super optimistic! Over six years of continued growth is a great trend. But to have an overwhelming majority of the people surveyed still optimistic in early 2010 after the worst financial and housing crisis of a generation? This is amazing!

Do you see where I’m going with this whole “perception” thing?

Everything has its pros and cons. Living in Pacific Palisades, one enjoys the comforts of living in Southern California: the amazing weather, the proximity to both beaches and mountains, the quality of the schools. One also has to deal with constantly clogged traffic, soaring gas prices, and cough-inducing smog. If you focus only on that negative 30-percent, you could be missing the bigger picture.

Comparing people’s real estate feeling from late 2009 to early 2003 may not be fair. Perhaps we should instead look at late 2009 to early 2009: in early 2009 most people were reeling from huge financial hits. But just a few months later they were feeling optimistic again. I think this says great things about the spirit of the American people.

But back to Fannie.

The most recent survey also shows that 65-percent of Americans prefer owning their own home; they see home ownership as much more than a financial investment. They also strongly feel that homeowners should uphold the financial commitment made when buying a home, even if home values have dropped and when they themselves are behind in their payments.

Eight out of 10 respondents think owning a home is important to the economy. While only 31-percent felt the economy was on the right track, 44-percent expected their personal finances to improve in the next year. Americans are optimistic. Americans rock.

And while home values have dropped (by huge percentages in some areas), 70-percent of respondents still believe that buying a home is one of the safest financial investments.

I must agree.

So what do you think: is the glass half full or half empty?