Fewer Homeowners See Home Values Falling

NEW YORK (Reuters) - Fewer U.S. homeowners expect the value of their homes to decline in the year ahead, but they also believe gains are unlikely, according to a Thomson Reuters/University of Michigan survey published on Friday.

The proportion of homeowners that expected declines in the value of their homes in the year ahead fell to 15 percent in January, the lowest level since early 2007.

That is down from 16 percent in the fourth quarter, and sentiment has improved over the past year. In the first quarter of 2009, 26 percent expected their home value to decline.

The mean anticipated annual gain over the next five years held steady at 2.7 percent in January. Given consumers' long-term inflation expectations, a zero, inflation-adjusted gain was expected.

Last month, 46 percent said their homes decreased in value during the past year, while 14 percent said they increased.

The lowest mortgage rates in decades and high affordability helped the hard-hit U.S. housing market find some footing in 2009 after a three-year slump.

Home buyers, however, appear to have the upper hand.

"The main issue now holding the housing market at low levels is not the buy side but the sell side. Most home buyers must also sell their current home, and nearly all homeowners view home selling conditions quite unfavorably," the survey said.

In the January 2010 survey, three-in-four homeowners viewed current home buying conditions favorably because of very attractive prices and low mortgage rates.

But, when asked about home selling conditions, nine of ten homeowners viewed current market conditions for the sale of their home unfavorably, largely over price declines.

"The impact of price declines is likely to remain a long-term drag on the housing market for both economic and psychological reasons," the survey said.

Homes that were valued in the top third of the distribution showed some greater strength than lower valued homes, the survey showed.