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Wednesday, 7 May, 2008 12:24 PM
U.S. Home Values
in Q1 Post Largest Decline in More than a Decade, Falling Back to
2005 Levels
More
than half of homeowners who purchased during U.S. market peak in
2006 are now underwater on their mortgages, according to Zillow.com(R)
Q1 2008 Home Value Report
Graphic
courtesy of www.centraldenverblog.com
SEATTLE --
Home values in the first quarter of 2008 fell 1.6 percent from the
fourth quarter and 7.7 percent from the year-ago quarter, marking
the most significant year-over-year decline in the past 12 years(1),
to a U.S. Zindex(R) home value indicator of $213,000(2), according
to the Zillow.com Q1 Home Value Report(3) released today. The median
U.S. home value has not been this low since the second quarter of
2005, leaving more homeowners who purchased in 2005 or later with
negative equity(4) than any quarter previously reported by Zillow.
Zillow(R) expanded its
Home Value Report this quarter to cover 160 metropolitan statistical
areas (MSAs) and added a supplemental report for its top 30 MSAs
that identifies when home values were last at first quarter levels,
when each market peaked and the percentage of decline since the
peak. With the exception of Dallas, which returned a one percent
year-over-year gain, each of these major markets declined from a
year ago with the majority falling back to the median values of
three to four years ago. For example, first quarter home values
in the Boston area were the equivalent to levels last seen in the
second quarter of 2003, down 16 percent from the peak, which occurred
in the third quarter of 2005. Values in the Los Angeles MSA have
declined to 2004 levels, down 19 percent from the market high recorded
in the second quarter of 2006. The Detroit area has been hardest
hit, retreating to value levels of 1998, down 24 percent from the
market peak in the fourth quarter of 2005.
Not surprisingly, homeowners
who purchased during a market peak are at most risk of being underwater
on their mortgages. Of homeowners nationwide who purchased when
U.S. home values peaked in 2006, one out of every two (51.6%) now
owes more on their mortgage than their home is currently worth.
For those who purchased in 2005 and 2007, the situation is only
modestly better with nearly 42 percent and 45 percent, respectively,
facing negative equity. By comparison, 16 percent of those who purchased
in 2004 have negative equity, as do 7 percent of those who purchased
in 2003.
For homeowners who purchased
in some of the most volatile markets, such as many parts of California
and Florida, as well as Phoenix and Las Vegas, rates of negative
equity can be twice the national median and, in some cases, as high
as 95 percent. This has been driven primarily by double-digit rates
of depreciation, coupled with low median down payments, often less
than 5 percent. For example, in the first quarter, Las Vegas home
values fell 25 percent year-over-year and nine out of 10 (89.9%)
homeowners who purchased in 2006, when the median down payment was
2 percent, now owe more than their home is worth.
"Home values in
most markets continued to slide in the first quarter, falling back
to levels we saw three to four years ago, which has left more homeowners
than ever underwater on their mortgages. While the high rate of
negative equity has little consequence to owners staying in their
homes, it can be devastating to those who need to sell immediately
or refinance to avoid ARM resets. The inability to secure refinancing
is ultimately contributing to the growing rates of foreclosure in
many parts of the country," said Dr. Stan Humphries, Zillow's
vice president of data and analytics. "The magnitude of annualized
declines has been increasing during each of the last five quarters,
which is a strong indication that home values still have further
to fall so we expect it's going to get worse before it gets better."
Although almost all markets
that Zillow analyzed this quarter (130 of 160) reported year-over-year
depreciation, nearly 90 percent, or 144 markets, returned positive
annualized appreciation over the past five years. In the Miami/Ft.
Lauderdale MSA, for example, the annualized appreciation rate over
five years was 7.2 percent despite a decline of 18.8 percent from
the prior- year quarter. The Oklahoma City MSA, which has not demonstrated
the rapid upswing of other markets, delivered 5.6 percent annualized
returns over five years and increased 5 percent from the first quarter
of 2007. For comparison, the five-year annualized appreciation rate
for the nation overall was 4.7 percent.
"We're clearly in
a period of market correction. Most major cities, particularly those
on the coasts, which bubbled in recent years are the same ones dropping
record levels year-over year," Dr. Humphries added. "What's
interesting is regardless of whether a market surged in the last
few years or remained more steady, like in the South and Midwest,
the rates of appreciation over the last five- and 10-year periods
are positive and relatively consistent with what we typically expect
to see over time -- mid-single digits."
For more information,
including the 160 local reports, a national report and the supplemental
report for top markets, visit http://www.zillow.com/quarterlies/QuarterlyReports.htm.
Select MSAs with High
Rates of Year-Over-Year Depreciation and Negative Equity Above 50
Percent
One-third of the markets Zillow reported this quarter (54 of 160)
posted year-over-year declines in the double-digits. Many of these
markets peaked in 2006 or earlier, and have fallen 20 percent or
more since their peak, contributing to some of the highest rates
of negative equity in the nation.
About Zillow.com
Zillow.com is an online real estate community where homeowners,
buyers, sellers, real estate agents and mortgage professionals find
and share vital information about homes, for free. Launched in early
2006 with Zestimate(R) values and data on millions of U.S. homes,
Zillow has since opened the site to community input, data and dialogue.
One of the most-visited U.S. real estate Web sites, Zillow's goal
is to help people become smarter about real estate in every stage
of the home ownership process -- buying, selling, remodeling and
financing. The company is headquartered in Seattle and has raised
$87 million in funding.
Source: Zillow.com
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