Despite five consecutive years of home-value declines, more than two in five (42%) polled prospective home buyers believe home values typically appreciate by 7% a year, according to a recent survey by Zillow.
This is an unrealistic expectation, Zillow says, as home values in a normal market have historically shown appreciation of 2% to 5% per year.
The survey, conducted with research firm Ipsos, asked prospective home buyes basic questions about the home buying process.
Despite the unrealistic expectations about home value appreciation, respondents answered questions correctly more than half the time (65%).
However, several important parts of the process confused them, Zillow says. Two in five (41%) buyers think they are required to buy private mortgage insurance regardless of the amount of their down payment.
Additionally, more than half of prospective home buyers who were polled confuse appraisals and inspections. Fifty-six percent said the purpose of an appraisal was to determine if the home is in good condition, when that is the purpose of an inspection.Â
More than one-third (37%) of respondents believe buying homeowner's insurance is optional, according to the survey. Most buyers (87%) know that closing costs are negotiable and can vary by bank and lender.