Press Releases

Home Values Continued Decline in Fourth Quarter, Leaving Approximately One in Three New Homeowners With Negative Equity

Condos Post Largest Year-over-Year Value Declines, down 7.4%, followed by Single-family homes, down 5.5%, according to Zillow® Q4 Home Value Report

Feb 12, 2008


SEATTLE, Feb. 12 /PRNewswire/ -- Home values continued to decline in the fourth quarter of 2007, falling 3.5 percent from the third quarter and 3 percent year-over-year to a U.S. Zindex® home value indicator(1) of $224,890, according to Zillow's Q4 2007 Home Value Report(2). The Zindex is the median Zestimate® valuation and measures the value of all homes in an area, not just those that have sold during the quarter. In 2007, condominiums posted the largest year-over-year drop, down 7.4 percent to a Zindex of $229,017 while single-family residences fell 5.5 percent to a Zindex of $230,908. On a quarter-over-quarter basis, the decline in value of single-family residences outpaced the decline of condominiums, falling 4.4 percent and 4 percent respectively.


Following on Zillow's recent database expansion to 67 million Zestimates on 80 million homes, the Zillow Home Value Report has been expanded to cover 125 Metropolitan Statistical Areas (MSAs), including a national report, and details for corresponding counties, cities and neighborhoods.

The continued decline in home values means many U.S. homeowners saw equity slip away while more homeowners were pushed into negative equity situations, meaning they owe more on their mortgage than the home is currently worth. Nationwide, those at most risk of being underwater on their mortgage are those who bought in the last two years when most markets peaked. Of those who bought in 2006, 39 percent now have negative home equity as do 30 percent of those who purchased in 2007. By comparison, only 3 percent of those who purchased five years ago, in 2003, and less than one percent of all homes in the U.S., in each of the years 2003, 2006 and 2007, have negative equity(3).

The rates of negative equity are typically higher in markets that have had significant value declines and relatively low median down payments. Parts of California, Florida, Nevada and Arizona, where the median down payments were zero to 5 percent during the last two years and year-over-year value drops in the fourth quarter were in the double digits have negative equity rates two to three times the national median. For example, in Las Vegas, where homeowners saw values drop 13.8 percent year-over-year, more than half (57.6%) of those who bought in 2007, when the median down payment for the area was 5 percent, and nearly three out of four (72.5%) who bought in 2006 with a median down payment of zero, are currently underwater.

"With consecutive declines over the past five quarters, we haven't seen the housing market bottom yet, and it may very well get worse before things get better. Even many markets that have been largely insulated from recent declines, like some in the Pacific Northwest, reported notable value declines in the fourth quarter," said Dr. Stan Humphries, Zillow vice president of data and analytics. "As home values have slid down further, the median amount of equity people have in their homes has declined and more U.S. homeowners are now underwater, owing more than the current value of their home."

While most homeowners still have positive equity in their homes, the amount of equity in most areas deteriorated in the fourth quarter. In fact, many of those who purchased in the last two years now have less equity than their original down payment. Homeowners who purchased in 2006 and 2007 placed a median down payment of 10 percent and now own a smaller fraction of their investment -- just 5 percent and 9 percent equity(4) respectively as of December 31, 2007. In contrast, those who purchased in 2003, after placing a median down payment of 10 percent watched the market grow at an annualized rate of 6.9 percent and now own a median of 37 percent of their home, without factoring in any payments toward principal.

"It's important to remember that value declines and negative equity situations are largely unrealized effects for most homeowners unless they are in a situation where they must sell or withdraw equity immediately," added Dr. Humphries. "The decline in values, combined with the recent rate cuts by the Fed should make entering the market more attractive to would-be buyers, but we may not see any effects until the spring when the home shopping season usually kicks off."

A full comparison of home values in the 125 Metropolitan Statistical Areas (MSAs), representing 43 million homes, can be found in Zillow's national Q4 2007 Home Value report, at To generate the quarterly Zindex for each MSA and the corresponding counties, cities and ZIP codes or neighborhoods, Zillow calculates more than 10 years of historical values. Highlights for select MSAs from the Zillow reports can be found below:

  Nationwide Quarterly and Year-over-Year Depreciation by Home Type

       Home Type                Zindex      Quarter-over-   Year-over-Year
                                            Quarter change     change
  All Homes                    $224,890        -3.5%           -3.0%
  Single-Family Residences     $230,908        -4.4%           -5.5%
  Condominiums                 $229,017        -4.0%           -7.4%
  Other (townhome, multiplex,  $176,424        -2.9%           -2.4%
   mobile home, etc.)

  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:

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

  United States   $224,890   -3.0%        9%           10%          30.4%

  Los Angeles-    $532,116  -10.6%        6%           10%          38.5%
   Long Beach-
   Santa Ana, CA
  Miami-Ft.       $261,237  -12.9%        3%            5%          43.0%
   Beach, FL
  Phoenix-Mesa-   $225,419  -12.1%        1%            6%          48.6%
   Scottsdale, AZ
  Riverside-      $320,905  -17.5%       -5%            5%          59.4%
   San Bernardino-
   Ontario, CA
  Tampa-St.       $174,078  -12.9%        3%            7%          44.2%
   Clearwater, FL
  San Diego-      $457,274  -10.3%        6%           10%          40.0%
   San Marcos, CA
  Las Vegas-      $250,214  -13.8%       -4%            5%          57.6%
   Paradise, NV
  Cape Coral-     $201,723  -20.1%        0%           10%          50.5%
   Fort Myers, FL
  Stockton, CA    $282,778  -26.4%      -19%            5%            77%

  Modesto, CA     $255,804  -22.9%      -14%            5%          71.2%

  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:

     MSA         Zindex    Zindex  Median Owner  Median Down   % of Home
  (ranked by     Value     Change   Equity(4)      Payment    Purchases that
   population              (YoY)   (1 year)(5)    (1 year)(5)   now have
     size)                                                     Negative
                                                              (1 year)(5)
  United States  $224,890  -3.0%        9%           10%          30.4%

  Tulsa, OK      $115,114  11.4%        9%            2%          17.0%

  Grand          $212,836   9.6%       12%            5%           9.4%
   Junction, CO
  Oklahoma       $113,476   8.1%        9%            5%          22.6%
   City, OK
  Augusta-       $112,692   7.3%        9%            5%          25.7%
   County, GA-SC
  Asheville, NC  $195,262   6.8%       23%           20%           5.3%

  Anderson, SC   $102,408   5.6%        9%            5%          24.2%

  Greensboro-    $139,768   5.5%       13%            9%          17.2%
   High Point, NC
  Raleigh-       $201,028   4.7%       10%           10%          15.5%
   Cary, NC
  Florence, SC   $107,603   4.6%        8%            5%           9.1%

  About® is an online real estate community where homeowners, buyers, sellers, and real estate agents and professionals find and share vital information about homes, for free. Launched in early 2006 with Zestimate values and data on millions of U.S. homes, Zillow has since opened the site to community input, data and dialogue, including "Home Q&A." Zillow's goal is to help people become smarter about real estate -- what homes are worth, what's for sale, and what local experts have to say about real estate and individual homes. One of the most-visited real estate Web sites, Zillow was the only Internet company named by Advertising Age magazine to its 2006 "Marketing 50" list of the most powerful consumer brands. Zillow is headquartered in Seattle and has raised $87 million in funding., Zillow, Zestimate and Zindex are registered trademarks of Zillow, Inc.

  (1) 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.

  (2) The data in Zillow's Home Value Reports is aggregated by a number of
      data providers for 125 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.

  (3) Referenced years are for 12-month periods ending Dec. 31, 2007, for
      one year; Dec. 31, 2006, for two years; and Dec. 31, 2003, for five

  (4) Median Owner Equity is the difference between the current home value
      (Zestimate as of Dec. 31, 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) Home equity data in press release tables are calculated based on homes
      purchased in each corresponding MSA in the past year (the 12-month
      period ending Dec. 31, 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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