Happy homeowners image via Shutterstock.

If someone were to chart it, I’d guess that the bell curve that represents how happy American homeowners have been over the last 10 years would be just about as volatile as the one that represents home values.

Actually, the emotional roller coaster might even be a carbon copy of the path of home prices from peak to trough, as the joy and exuberance most owners express about their homes at any given moment is directly proportional to what it’s worth at the time.

But there are two germane, essential truths: (1) Happiness is the ultimate objective of the intentional life, of which homeownership is a part; and (2) Home values, like the value of any asset, go up and down.

So, wouldn’t it be great if we could decouple our experience of happiness with our homes from their values, freeing ourselves up to simply enjoy them and be happy no matter what’s going on in the market? What if we can make our experience of homeownership recession-resistant, even if we can’t recession-proof the market itself?

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Well, I know some such happy homeowners — people who remained free of the angst and teeth-gnashing that seemed to become the near-universal sentiment among homeowners during the housing recession. And they also remained free of the euphoric rush and frenzied decision failures of homeowners at the top of the market.

Here are a few of the traits and behaviors that I’ve noticed in these happy homeowners:

1. Smart, proactive money managers. This does not mean these people are day traders or sit around the computer tracking every cent they spend. What it does mean is that these people are assertive about their financial planning, understand their income and expenses, save and invest for the present and the future, and live well within their means. This empowers them to weather occasional financial storms like illnesses, layoffs, and market downturns without excessive panic and fear about what their home is worth at any moment in time.

I once heard a happy homeowner express his belief that there should never be a need to tap into an emergency fund, because so-called “emergencies” like car repairs and roof leaks are just inevitabilities of life. So, instead of having an emergency fund set aside, he has structured his income and savings and expenses so that he saves upwards of 20 percent of what he makes every month, no matter what, and is always in a state of financial preparedness for the curve balls that life can throw.

2. Optimistic about their long-term future — and that of the market. I’ve been fascinated lately to see all the talk of how much better mutual funds perform over the long term if they are simply invested in every stock on an exchange and parked there for decades, versus being actively traded by even the most expert of Wall Street wizards.

I find that so compelling because it mirrors my experience of real estate: One of my first clients was a 70-year-old man whose home I sold for $550,000; he told me he had paid less than $20,000 for it 30 years earlier.

Homeowners who have an optimism that the value of their home will increase over the very, very long term tend to be less hung up on and stressed out by the cyclical ups and downs in the real estate market.

3. Conservative mortgage holders. These folks often put a lot of money down, make extra payments, invest in improvements that bring up the value of their home, or make some combination of these and other relatively conservative mortgage moves. They might refinance if interest rates drop so low the costs of refinancing pale by comparison with the savings. But these folks are generally inclined against taking short-term or aggressively adjustable loans, and they tend to disfavor frequent refinancing or excessive borrowing against their homes.

As a result, even if they didn’t put a huge down payment on the home at the time they bought it, they do tend to get and stay in a relatively strong equity position compared to their peers.

4. Relatively stable and committed to their homes for the long term. People who own homes that work well for them and their families — and will work well for years and years to come — tend to be less emotionally yanked around by market vagaries.

Homebuyers take note: Happy homeowners tend to be people whose homes have ample space, are in good condition, and are in neighborhoods where they feel safe and comfortable; if you can position yourself well with respect to as many of these criteria out of the gate by being smart about the home you choose, you’ll be that much closer to membership in this select club.

These people are aware of what’s going on in the market; they’re just not obsessed with it, because they don’t plan to move in any event.

Often times, a happy homeowner’s commitments to his home mirrors a commitment to his job or career or line of business, if he’s self-employed, which allows him to take the stance that as long as he can make the payment, he’s planning to stay put for a very, very long time. And that, in turn allows him to opt out of the “freak out”-engendering fixation on real estate headlines and market data that in a down market causes so many unhappy homeowners to make panicked, poor real estate decisions.

When the bottom arrives in the mythical national housing market some time later this year, how far will we be from the heady peaks of the real estate boom when prices were at their zenith?

That prediction from Fiserv, the analytics company the publishes the Fiserv Case-Shiller Indexes, estimates that at the bottom, or “trough” of the peak-to-trough fall, prices will be 35 percent lower than their peak level in the first quarter of 2006.

“After years of large declines, the housing market is showing signs of stabilization. In the fourth quarter of 2011, home prices in 70 markets, representing 18 percent of the 384 metro areas tracked by Fiserv Case-Shiller, were unchanged or had increased compared to the fourth quarter of 2010. In 32 percent of the markets (122 metro areas), the price declines were under two percent. In the fourth quarter of 2011, the average price of a U.S. single-family home fell to a new post-bubble low, declining four percent from the year-ago period. Fiserv Case-Shiller projects a further modest decline of 0.8 percent by the end of 2012,” estimates Fiserv.

Markets rebounding off very large price declines include Detroit, Mich. (+9.8 percent), Cape Coral, Fla. (+3.5 percent) and Port St. Lucie, Fla. (+1.1 percent). However, prices dropped by more than two percent in nearly one-half of metro areas (191), including double-digit decreases in Atlanta (-12.8 percent), Reno, Nev. (-10.8 percent) and Tucson, Ariz. (-10 percent).

“We expect that home prices, which generally lag changes in sales activity by nine to 12 months, will stabilize by the end of this summer and then rise at an annualized rate of 3.9 percent over the next five years,” says David Stiff, Fiserv’s  chief economist.

“The precipitous drop in home prices was an immediate cause of the last recession and the financial crisis. Falling home equity has cut into household consumption and has further constrained the economic recovery,” Stiff added. “However, very low prices have also started to draw in more buyers. As demand for houses ramps up, construction activity will increase and residential investment will begin to make a substantial contribution to the recovery and GDP overall.”

Due to the unprecedented price decline and record-low mortgage rates, affordability has improved dramatically. The relationship between home prices and rents has returned to 1998 levels. The ratio of median single-family home price to median family income is lower than any time since 1991. For a conventional mortgage, the payment for a median-priced home represents just 12 percent of median-family income, the lowest percentage on record (since 1971). Fiserv Case Shiller projects this record-level affordability will eventually bring more first-time and trade-up buyers back into the housing market, especially as apartment rents continue to increase and new households are formed, making buying a cheaper option than renting. Growing demand from first-time and trade-up buyers will finally put a floor under home prices, ending the nearly seven-year collapse of the housing bubble.

Other highlights from the latest Fiserv Case-Shiller Indexes include:

• Some of the hardest-hit markets are expected to experience the fastest growth during the recovery. Six of the 10 markets where annualized prices are expected to rise the most over the next five years have experienced price declines of more than 50 percent from their peaks.
• Conversely, home prices in markets that were spared the worst of the housing downturn are projected to grow at a slower pace. Texas, for example, accounts for 11 of the 39 markets where prices are projected to increase at an annualized 1.5 percent or less over the next five years.
• Of the 30 best-performing housing markets in the 2011 fourth quarter, 13 had unemployment rates of seven percent or less and 14 had a median family income above the national average.
• Seven of the 10 worst-performing markets in 2011 had unemployment rates higher than the national average and median family incomes below the national average.
• Twenty-two of the 25 markets that have seen the largest decline in home prices from peak to the end of 2011 are in California and Florida.

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses mortgage purchase applications.

• Mortgage applications to buy a home rose for the third straight week after accounting for the normal seasonal patterns. However, this data point implies no measurable pick up in home sales over the past 12 months, contrary to actual rising home sales figures from MLSes. The reason is due to the fact that mortgage applications data has no information about  approval rates and it misses out completely on all-cash deals, which have represented about one-third of home sales in the past year.
• Even though the mortgage data should be taken with a grain of salt, the rising weekly trend is encouraging in that owner-occupant buyers (as opposed to all-cash investors) may be steadily returning to the market.
• Refinancing activity held steady over the past week and is comfortably above last year’s figures. However, mortgage bankers may need to mindful of a possible near collapse in the refinancing business by the year-end or early next year when mortgage rates rise. The only source of mortgage business will be from home purchases. Banks, therefore, will need to think of reallocating staff time to focus on home purchase mortgages rather than refinance applications.

Unlike most of my neighbors, I keep chickens and unlike the flocks of the large operators who supply the local markets, my free range chickens roam unconfined. They pick up much of their own living, cost me little in time or money, and produce yellower yolked eggs and more succulent meat than I could hope to harvest from fowl reared in wire cages. Best of all, other folks seem to appreciate that kind of good eating as much as I do and I find a ready market for my homegrown poultry products.

Raising Free Range Chickens

I have a list of regular customers who buy my eggs and chickens year round, at premium prices. These are choosy people who don’t want to eat the products of commercial flocks raised on chemically treated food. In fact, they pay me not to feed such rations. Some even claim that they’d recognize my wares anywhere! Satisfied buyers refer their friends to me, and I seldom have more meat or eggs than I can sell but if there are any extra layings, my neighbors are glad to purchase them at my usual price (between 50 cents and 60 cents a dozen).

Some of the chickens I sell are unneeded roosters, which I offer from fryer weight on up either live or dressed, as the customer prefers, at $I.00 to $1.50 per bird depending on its size. Others are my less productive laying hens, which I cull about once a year. Any extra culls or roosters go into the freezer for home use or later sale.

Most of my buyers place orders regularly, or phone in their requests ahead of time. Since I don’t make deliveries, the customer comes to my home and I have the package waiting when he or she arrives.

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the unemployment rate and payroll data.

• While the unemployment rate fell another notch in April, payroll data today showed a disappointingly low number of net new jobs added to the economy.
• The unemployment rate fell from 8.2 percent in March to 8.1 percent in April.  This is nearly a percentage point improvement over last April’s 9.0 percent rate.
• One data point that tempers the good news on the unemployment rate is the shrinking of the labor force.  However, there is a counterpoint: labor force data is highly variable.  While the labor force has declined by nearly half a million workers in March and April, data from January and February showed that nearly a million people entered the labor force.
• On net, 115,000 jobs were added to payrolls in April, this included an increase of 130,000 in private payrolls and a further shrinkage of 15,000 on government payrolls.
• The average workweek for all private payroll employees was unchanged in April at 34.5 hours and hourly earnings rose $0.01 in the month and are up 1.8 percent over the year.  Because hours have increased from a year ago, weekly earnings are up 2.1 percent.
• Continued availability of labor and slow job growth may keep earnings from rising much going forward, but job stability which may be indicated by yesterday’s jobless claims data coupled with modest growth in earnings may give consumers the confidence they need to make major purchases, such as that of a home, that they delayed when uncertainty was high.

Realtor® comments and replies to the latest Realtors® Confidence Index continued to indicate recovery in the residential markets. All real estate is local, so comments were varied depending on location. The problems noted in previous months continue. For example,

• Obtaining a mortgage is reported as difficult.
• Bargain hunters and low-price bids continue.
• Pricing continues to be a challenge.
• The appraisal process continues to be a problem.

However, fewer respondents noted major problems than had previously been the case, and a growing number of respondents in recent months have been indicating cases of multiple bidding, low inventories, a resurgence of buyer interest, and the rapid resolution of distressed property sales. There continues to be discussions of Shadow Inventory in the press. Realtor® respondents appear to believe that increased inventories of unsold homes will not be a problem. Many respondents cited an inventory shortage.

The health of the real estate market appears to be a function of location of the respondent, with some markets starting to trend upwards. The real estate markets are driven by jobs and the economy—and there the reports have been mixed. There has been relatively good job growth in recent months, but not enough to restore the economy to acceptable unemployment levels. We are still looking at possibly three to four years before unemployment reaches reasonable levels if job creation continues at its current pace. In addition, there are a variety of major uncertainties impacting the economy—jobs, gasoline prices, unemployment, budget deficits, and a variety of other potentially negative situation.

In spite of all the economic negativity in recent months, however, the comments in this month’s RCI show a market starting to turn. Overall, this month’s Realtors® Confidence Index seems to indicate a continued market recovery.