Press Releases

Nearly 16% of Homeowners Who Bought in the Past Year Have Negative Equity as Home Values Decline for Fourth Consecutive Quarter

Parts of California, Florida and Las Vegas among hardest hit, according to Zillow.comĀ® Q3 Home Value Report

Nov 20, 2007

SEATTLE, Nov. 20 /PRNewswire/ -- Home values nationwide declined for the fourth consecutive quarter, down 5.7 percent year-over-year -- the largest year-over-year decline in more than a decade, according to Zillow's Q3 2007 Home Value Report (1) released today. This brings the U.S. Zindex® home value indicator (2) to $244,000, down 2.8 percent from the second quarter. The Zindex is the median Zestimate® valuation and measures all homes in an area, not just those that have sold during the quarter.


For many homeowners who bought during the last two years when most local markets reached their peak, subsequent declines in value have left them with negative home equity, owing more than the home is currently worth. As of September 30, nearly 16 percent (15.6%) of homeowners nationwide who bought in the last year (3) and 17.5 percent of those who purchased two years ago have current home values that are less than the original mortgage amount. By comparison, less than 2 percent (1.8%) of those who purchased a home five years ago have seen their equity slide into the negative.

Not surprisingly, markets with the greatest proportion of homes with negative equity were those hit hardest by declining values. For example, people who purchased homes in California's Central Valley, parts of Florida and Las Vegas during the past year have seen double-digit depreciation and negative equity rates reach up to five times the national median.

"The decline in home values picked up steam in the third quarter, posting the largest nationwide year-over-year drop in more than a decade," said Stan Humphries, Zillow's vice president of data and analytics. "Continuing depreciation coupled with the downward trend in the size of mortgage down payments has left many new home owners 'upside down' on their mortgage, meaning they owe more than the current value of their home.

"Since homeownership is typically a long-term investment, it's important to keep in mind that short-term value declines mostly affect homeowners who either must sell or want to withdraw equity," added Humphries. "The run-up in home values we saw over the last several years had many home buyers counting on continued housing appreciation to drive home equity growth, but the market has proven that this strategy is no longer a safe short-term bet."

Despite decreasing home values and increasing incidence of negative equity scenarios, most U.S. homeowners still have positive equity in their homes. In fact, many homeowners who purchased in the last two years have seen overall equity increase since they made their purchase. The variances and movements in owner equity depend on many factors such as when the home was purchased, how much was put down and net market appreciation.

Americans who bought a home in the last two years placed a median down payment of 10 percent and now have a median of 13 percent equity (4) in their investment. This is the equivalent of owning only about 200 square feet -- the size of one standard bedroom -- in an average 1,500-square-foot, three-bedroom, two-bath home. Most homeowners who bought five years ago have the benefit of time and the market on their side. After placing a median down payment of 11 percent, these homeowners watched home values grow at an annualized rate of 9.4 percent over the past five years and now own a median of 41 percent of their home.

A full comparison of home values in the 83 Metropolitan Statistical Areas (MSAs) can be found in Zillow's national Q3 2007 Home Value report, at Zillow has also released individual data for each MSA broken out by county, city and ZIP code or neighborhood. The home equity data Zillow added this quarter can be found on a new tab in the National Report, titled MSA Homeowner Equity (3). Highlights for select MSAs from the Zillow reports can be found below:

Select MSAs with High Rates of Year-Over-Year Depreciation

Many MSAs with high rates of year-over-year depreciation also tend to have a high percentage of home purchases in the past year with negative equity. Some examples below:

                                                                 % of Home
                                                              Purchases that
                                           Median      Median     now have
       MSA            Zindex                Owner       Down      Negative
  (sorted by          Change    Zindex    Equity(4)    Payment    Equity(6)
  population size)    (YoY)      Value   (1 year)(5) (1 year)(5) (1 year)(5)

  United States       -5.7 %    $244,000     13 %        10 %       15.6 %

  Los Angeles-
   County, CA        -10.1 %    $486,000      7 %        10 %       35.4 %

  Lauderdale, FL     -11.6 %    $264,000      6 %         5 %       30.0 %

  Phoenix-Mesa, AZ   -10.7 %    $234,000      7 %         5 %       31.7 %

   Clearwater, FL    -13.1 %    $175,000      9 %         8 %       25.4 %

  San Diego, CA      -10.8 %    $460,000     10 %        10 %       32.2 %

   Yolo, CA          -13.7 %    $333,000      4 %        10 %       43.2 %

  Las Vegas, NV-AZ   -12.7 %    $245,000      3 %         5 %       44.6 %

  Stockton-Lodi, CA  -24.8 %    $298,000    -11 %         0 %       66.6 %

  Santa Barbara-
   Santa Maria-
   Lompoc, CA        -20.1 %    $509,000      6 %        20 %       35.6 %

  Merced, CA         -28.6 %    $233,000    -13 %         0 %       72.1 %

  Select MSAs Posting Positive Year-over-Year Appreciation

Some markets bucked the depreciation trend this quarter and reported year-over-year appreciation that helped contribute to positive owner equity and a lower percentage of home purchases in the past year with negative equity. Examples of these below:

                                                                 % of Home
                                                              Purchases that
                                           Median      Median     now have
       MSA            Zindex                Owner       Down      Negative
  (sorted by          Change    Zindex    Equity(4)    Payment    Equity(6)
  population size)    (YoY)      Value   (1 year)(5) (1 year)(5) (1 year)(5)

   Bremerton, WA       1.7 %    $349,000     16 %        10 %        6.4 %

   Salem, OR           0.6 %    $274,000     15 %        10 %        8.9 %

   Hill, NC-SC         8.9 %    $149,000     18 %         9 %        4.4 %

  Nashville, TN        3.5 %    $157,000     14 %         5 %        7.0 %

  Tulsa, OK            3.6 %    $103,000     13 %         5 %        1.2 %

   Easton, PA          5.7 %    $215,000     20 %        10 %        1.8 %

  Honolulu, HI         1.3 %    $593,000     23 %        10 %        0.9 %

  Rockford, IL         3.4 %    $122,000     19 %         6 %        1.4 %

  Bellingham, WA       4.3 %    $258,000     23 %        15 %        0.9 %

  Grand Junction,
   CO                 13.8 %    $209,000     17 %         6 %        2.2 %


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  (1) The data in Zillow's Home Value Reports is accumulated from several
      public sources and is aggregated by a number of data providers for
      83 Metropolitan Statistical Areas dating back to 1997. Mortgage and
      home loan data is typically recorded in each county and publicly
      available through a county recorder's office.

  (2) Referenced years are for 12-month periods ending Sept. 30, 2007, for
      one year; Sept. 30, 2006, for two years; and Sept. 30, 2003, for five

  (3) The Zindex home value indicator is the median Zestimate valuation for
      a given geographic area on a given day, and includes the value of all
      homes, not just those that sold in a given period. Exactly half the
      Zestimates for a region are below this number, and half the Zestimates
      are above it.  It is expressed in dollars and is for a particular
      geographic region.

  (4) Median Owner Equity is the difference between the current home value
      (Zestimate as of Sept. 30, 2007) and the original loan amount.
      Negative numbers indicate that the current home value is less than the
      original mortgage and referred to as negative equity.  To be
      conservative, principal payments since initial loan origination have
      been excluded from the analysis.

  (5) Data in all press release tables are calculated based on homes
      purchased in each corresponding MSA in the past year (the 12-month
      period ending Sept. 30, 2007)

  (6) Percentage of home purchases with negative equity indicates how many
      homeowners who purchased in the last year have current home values
      that are lower than the original loan amount.

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