Homebuyers uneducated about home values

A recent study from Zillow found that more than four in 10 Americans think their homes' value will increase by 7 percent annually, which is one of many fallacies believed by consumers about the residential housing industry.

Typically, home values appreciate by 2 percent to 5 percent on an annual basis, the study noted.

"It's troubling that we're still in the midst of one of the worst housing recessions in history, and yet prospective buyers continue to have such high expectations for home value appreciation," said Dr. Stan Humphries, chief economist at Zillow.

More than 35 percent of respondents think homeowner's insurance is not mandatory, the study found. Actually, the opposite is true, as the insurance is more for the lender than the buyer. Another 47 percent noted that they would own the home after signing the contract, which is false. A consumer does not own the home until after the closing of the sale.

It may be a good idea for lenders to help consumers better understand the ins and outs of homebuying, as it could make the process easier for all parties.