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4Q price declines push homeowners underwater

Home prices declined more in the fourth quarter of 2010 than in any period since the first quarter of 2009, according to Zillow’s fourth quarter Real Estate Market Reports.

Falling 5.9 percent year-over-year, the Zillow Home Value Index reached $175,200 by the end of 2010, off 27 percent from its June 2006 peak.

The declining home values combined with a slowdown in the foreclosure rate due to the so-called robosigning scandal to push the percentage of underwater single-family homeowners with mortgages to 27 percent, up 23.2 percent from just a quarter earlier.

Negative equity could begin to fall in early 2011 as foreclosures increase. Foreclosure liquidations peaked in October, when 0.12 percent of U.S. homes were formally foreclosed. That number fell to 0.9 percent in December, as the robosigning scandal stalled action by the nation’s largest banks.

Zillow Chief Economist Stan Humphries attributed the price declines to the expiration of the homebuyer tax credits, which inflated the market in 2010.

"While the tax credits did not hurt the housing market, they did delay its bottom by interrupting the housing correction that was taking place," he said in a release accompanying the report. "Home value trends in the fourth quarter remained grim, but the good news is that these declines, while painful in the short-term, mean we're getting closer to the bottom.”

San Diego trailed only San Francisco and Los Angeles in the Zillow Home Value Index. Its $353,700 number was down 3.4 percent from the third quarter and 1.2 percent from the fourth quarter a year ago. The market’s home value index is off 34.3 percent from peak. Negative equity in the area was 21.3 percent.

Las Vegas led the nation in homes with negative equity, at about 81.5 percent of all properties with mortgages, Zillow said. It was followed by 69.9 percent in Phoenix; 67.9 percent in Reno, Nev.; 61.7 percent in Orlando, Fla.; and 58.5 percent in Modesto, Calif.

The median home value in Las Vegas was $125,156 in December, the lowest since February 2000 and down 59 percent from the 2006 peak, Zillow said.

Atlanta had the fastest increase in negative equity, with the percentage of underwater homes rising to 54 percent from 37.6 percent the previous quarter. Atlanta’s median home value was $128,064 in December, equivalent to November 1999 and 29 percent below the area’s 2006 peak, according to Zillow.

The total value of U.S. single-family homes tumbled about $798 billion in the fourth quarter, according to Zillow. For the year, values fell by more than $2 trillion to $22.3 trillion.

Zillow’s estimates are based on sales data and public information about individual homes that aren’t on the market, such as their size and amenities, Humphries said. They exclude homes that are resold after foreclosure, when prices are usually at least 20 percent less than similar properties, he said.

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