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Homeowners fear lost equity more than natural disasters

by Broderick Perkins

(11/11/2011) ERATE Exclusive - What could be worse than a fire incinerating your home, a tornado ripping it to shreds or a hurricane submerging it beneath a storm surge?

Hands down, lost value.

Mother Nature's worst has nothing on the financial disaster that comes with equity drain.

Falling home values are a greater threat to homeowners than natural disasters according to a survey of homeowners who more and more often see the American Dream as an insomnia-inducing nightmare.

The October survey found that more than half the respondents (58 percent) ranked declines in home values as the biggest risk to their home compared to 15 percent who feared fire, 9 percent turned off by tornadoes and 8 percent hunkered down about hurricanes.

"Home prices dropped in 10 of the 20 key U.S. metro areas last month, and prices for single family homes are down nearly 4 percent from a year ago. Homeowners clearly see the ongoing uncertainty surrounding housing values," says Scott Ryles, CEO of Home Value Insurance Company, an Ohio-licensed insurance carrier that commissioned Koski Research to conduct the survey of 1,005 homeowners from Sept. 28 to Oct. 3, 2011.

When asked whether owning a home today is the American Dream or a nightmare, 52 percent of U.S. homeowners viewed it as the American Dream but nearly as much, 48 percent said it's become a nightmare.

Some homeowners are so concerned about losing home values they monitor home prices more than they monitor their own cholesterol.

The survey found that 56 percent of U.S. homeowners monitor home prices in their area and are twice as likely to monitor home prices (39 percent) as to monitor their cholesterol (19 percent).

They'd better watch that. Other surveys says housing related concerns can be bad for your health.

One academic study recently found a correlation between a rise in foreclosures and increased hospital admissions and visits to emergency rooms for everything from nausea, fevers and abdominal pain to hypertension, chest pain and diabetes.

Another academic study, focusing on adults over 50, found high rates of depression among those behind in their mortgage payments and a higher likelihood of making unhealthy financial tradeoffs regarding food and needed prescription medications.

"The survey results demonstrate how the decline in home values continues to undermine homeowners' confidence in the housing market," said Ryles.

Homeowners place a lot of value hope in homeownership, but are hard fought to keep that hope alive.

The survey found 62 percent said their home is their biggest investment, but 37 percent believe buying a home today is generally a risky proposition. Almost one in five (18 percent) are "not sure" they would recommend homeownership to a young person today.

The survey also found:

• Sixty-seven percent believe home values have declined in their community in the past three years.

• Nineteen percent believe home values are not finished falling.

• Sixty-seven percent don't believe home values will change in the next 12 months.

• Fourteen percent believe home values are likely to go up in the next year.

• Fifty-two percent of those who purchased their home four to seven years ago reported their home is worth less than they paid for it.

• Eighty-five percent say it is a bad time to sell, 86 percent say it is a good time to buy and 23 percent of U.S. homeowners said they are likely to sell their home in less than five years.

"The truth is, nobody knows where home prices are going, and the risk of substantial further drops is very real," said Robert Shiller, a Yale professor and housing market expert.

"While there are some positive signs, there are ongoing factors that are likely to keep pressure on home prices. Government policy initiatives to support the market are offset by persistently high unemployment, foreclosures and difficulty in obtaining mortgage financing," Shiller added. Refinance at Today's Low Rates!

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