Loan Modification

Declining home values sink one-fifth of homeowners

By Jay Hammond

U.S. home values fell for the ninth consecutive quarter during the first three months of 2009 leaving one in five American homeowners with negative equity in their homes.  The first quarter Zillow Home Value Index fell to $182,378, a decline of 14.2 percent over the same period in 2008. The last time the market was at this level was the first quarter of 2004.

Of the 161 metropolitan areas covered by the Zillow Real Estate Market Reports, the five best performing markets are:

• Fayetteville, NC, where home values increase 14.4 percent to an average value of $118,121
• Oklahoma City, OK, where home values increased 5.1 percent to an average of $118,446
• Binghamton, NY, where home values increased 2.5 percent to an average of $114,604
• Jacksonville, NC, where home values also increased 2.5 percent to an average of $138,881
• Cumberland, MD where home values increased 2.3 percent to an average of $82,174

The five worst performing markets were all in California, although the decline has slowed somewhat in some locations. For example, the Zillow Home Value Index fell 18.9 percent in the Los Angeles metro area and 18 percent in San Diego. Both declines as less than the drops experienced during the third and fourth quarters of 2008. Unfortunately, the value index in both markets remain more than 30 percent lower than previous peak markets.

The five metropolitan areas posting the worst performances are:

• Salinas, CA where home values declined 36.6 percent to and average of $301,793 (a level not seen since the second quarter of 2000)
• Redding, CA, where values dropped 34.1 percent to and average of $197,193
• Stockton, CA, where home values fell 32.4 percent to an average of $175, 484
• Madera, CA, where values declined 32.1 percent to ad average of $151,392
• Vallejo-Fairfield, CA, where home values dropped 31.8 percent to an average of $235,385.

As previously reported, pending home sales increased slightly during March. A Zillow survey of homeowner sentiment however, reveals that potential sellers appear to be holding back waiting for the housing market to show signs of recovery. According the the Zillow survey, 31 percent of homeowners are at least somewhat likely to put their homes on the market during the next 12 months if they felt the real estate market was improving. Of those willing to consider putting their homes on the market, 71 indicate increasing home sales in their neighborhoods would be evidence of a turnaround in the market.

?Slowing declines in select markets are a bright spot or, at least, what passes for one given current market conditions,? said Dr. Stan Humphries, Zillow vice president of data and analytics. ?Unfortunately, given the magnitude of the current rates of decline, we’re still many months away from a bottom even as depreciation slows. Moreover, the additional information we have this quarter on ’shadow inventory,’ with one-third of homeowners indicating they would like to put their home on the market if conditions improve, confirms our earlier fears that a bottom in home values could be quite protracted. By our calculations, this could translate into as many as 20 million homes that could seep into the market as prices stabilize, maintaining a constant stream of supply that far outpaces demand, thus keeping prices flat. I’m doubtful that we’ll see the bottom until 2010, and thereafter it’s increasingly clear that we’re likely to have a long bottom before we see meaningful recovery in home values.?

Full post as published by Blown Mortgage on May 06, 2009 (boomark / email).