U.S. Home Values Drop Nearly 10% in Q2 Leaving Almost One-Third of Homeowners Who Bought in the Past Five Years Underwater on Their Mortgages
One in four homes sold in past year was for a loss; Foreclosed homes account for 50% of all home sales in some markets, according to Q2 2008 Zillow® Real Estate Market Reports
Aug 12, 2008
SEATTLE, Aug. 12 /PRNewswire/ -- U.S. home values in the second quarter posted the largest year-over-year decline in the past 12 years(1), dropping 9.9 percent from the year-ago quarter and 1.7 percent from the first quarter to a U.S. Zillow Home Value Index (HVI) of $206,919(2), according to the Q2 Zillow Real Estate Market Reports(3) released today. The median U.S. home value has not been this low since the fourth quarter of 2004, leaving nearly one-third (29.1%) of homeowners who purchased since 2003 with negative equity(4).
Zillow expanded its Real Estate Market Reports this quarter, adding a number of new measures to monitor 165 metropolitan statistical areas (MSAs), which is the largest sample of markets by any housing report. The significant majority of MSAs (140) lost value since the second quarter of 2007 and those in some of the hardest hit markets have seen more than one-third of their home's value lost in the past year. For example, the Zillow Home Value Index in Stockton, Calif. fell 38.2 percent from the year-ago quarter while the Las Vegas, Los Angeles and Miami areas have fallen 27.4 percent, 21.4 percent and 20.8 percent respectively.
Not surprisingly, homeowners who have experienced the most significant value declines are at most risk of being underwater on their mortgages -- meaning they owe more than their home is currently worth. Nationwide, for those who purchased their home since the beginning of 2003, nearly one in three (29.1%) now have negative equity. The highest rates of negative equity are among those who purchased in 2006, when most markets peaked, as nearly half (45%) of those buyers across the U.S. now face negative equity after placing a median down payment of 10 percent. The rate is nearly double for those in the Stockton MSA where nearly every homeowner (95%) who bought in 2006 -- with a median down payment of zero -- is underwater.
The increasing rates of negative equity coupled with rising rates of foreclosures continue to have an impact on the macro real estate market. To help monitor these effects, Zillow has added new measures to its reports under the label Distress Signals, which tracks, by quarter, the percentage of homes sold for a loss and the percentage of homes sold in foreclosure, dating back to 2003. Nationwide, nearly one in four (23.7%) homes sold during the past year sold for a loss while nearly 15 percent of sales were foreclosures(5). In parts of California, more than 60 percent of homes sold in the past year were for a loss while homes sold in foreclosure exceeded 50 percent. In New York- Northern New Jersey-Long Island MSA, which has the lowest rates of foreclosure among the markets monitored by Zillow, the percentage of homes sold for a loss since the second quarter 2007 is 8.8 percent and the percent of homes that sold in foreclosure is 3 percent.
In many markets, the rate of these Distress Signals is two to three times what was reported just a year ago. For example, 32.7 percent of homes sold in the second quarter were sold for a loss and 18.6 percent were foreclosure sales compared to the year-ago quarter when the rates were 12.2 percent and 7 percent respectively. In the San Francisco-Oakland-Fremont MSA, for example, nearly half (48%) of all homes sold in the second quarter recorded a loss while 34.3 percent were foreclosed; however, just a year ago, the rates were 14.9 percent and 10.7 percent respectively.
"The second quarter is the sixth consecutive quarter of home value declines and we see little promise of turnaround in the short-term as the rates of decline have yet to slow and, in fact, actually accelerated in many markets," said Dr. Stan Humphries, Zillow's vice president of data and analytics. "The high rates of negative equity are having a direct effect on home sales figures as we've seen considerable growth in foreclosure transactions and homes selling for a loss. Unfortunately, while there are a few bright spots -- like Pittsburgh, Oklahoma City and Austin that reached record-high values -- most markets are likely to remain in negative territory for the next few quarters given the magnitude of current year-over-year declines."
Although the significant majority of markets reported year-over-year depreciation this quarter, 148 -- or 90 percent -- returned positive annualized appreciation over the past five years and every market has shown positive appreciation over the past 10 years. For the nation, these rates are 4.4 percent and 6.5 percent respectively. For example, despite a 21.4 percent year-over-year decline in median values, the Los Angeles-Long Beach-Santa Ana MSA returned annualized appreciation of 4.8 percent over the past five years and 9.1 percent over past 10 years. The Oklahoma City MSA, which has not demonstrated the rapid upswing of other markets, delivered a modest 1.1 percent gain from the second quarter of 2007 and has returned 6.1 percent annualized returns over five years and 5.7 percent over 10 years.
Interestingly, homeowners seem to be oblivious to the reality of the housing market as it pertains to their individual home. As reported last week through the Q2 Zillow Homeowner Confidence Survey(6), 62 percent of homeowners think their home value increased or stayed the same in the past year and 75 percent expect their home value to increase or stay the same in the next six months. Based on the Q2 Real Estate Market Reports, 77 percent of homes actually declined in value over the past year, a slight increase from the 75 percent that declined year-over-year in the first quarter.
For more information, including the full national report, 165 local reports and the Q2 Zillow Homeowner Confidence Survey, visit http://www.zillow.com/reports/RealEstateMarketReports.htm. Highlights for select MSAs from the Zillow reports can be found below:
Select MSAs with High Rates of YOY Depreciation, Negative Equity and Sales for
Loss/Foreclosure Sales Q2 Q2 Zillow HVI % % Change When MSA Home Change from Market was (ranked by population Value (YoY) Market last at Q2 size) Index Peak Level United States $206,919 -9.9% -13.3% 2004-Q4 Los Angeles-Long Beach- Santa Ana, CA $460,723 -21.4% -23.7% 2004-Q1 Detroit-Warren-Livonia, MI $124,126 -12.9% -20.3% 1999-Q4 Miami-Fort Lauderdale- Miami Beach, FL $226,101 -20.8% -26.8% 2004-Q4 San Francisco-Oakland- Fremont, CA $557,208 -16.7% -19.1% 2004-Q1 Phoenix-Mesa- Scottsdale, AZ $205,520 -19.3% -28.8% 2004-Q4 Las Vegas-Paradise, NV $205,501 -27.4% -34.4% 2003-Q4 Stockton, CA $216,100 -38.2% -47.6% 2002-Q2 % Homes % % of % of Sold for Foreclosure(7) Purchases 2006(9) a Loss Transactions since Purchases MSA (Past 12 (Past 12 2003(8) w/ (ranked by population size) months) months) w/Negative Negative Equity Equity United States 23.7% 14.5% 29.1% 44.8% Los Angeles-Long Beach- Santa Ana, CA 38.3% 31.9% 39.9% 71.1% Detroit-Warren-Livonia, MI 46.2% 38.5% 52.4% 53.8% Miami-Fort Lauderdale- Miami Beach, FL 20.2% ** 44.6% 76.2% San Francisco-Oakland- Fremont, CA 37.2% 29.2% 36.8% 56.1% Phoenix-Mesa-Scottsdale, AZ 38.1% 31% 40.1% 75.5% Las Vegas-Paradise, NV 54.7% 40.5% 56% 72.8% Stockton, CA 63.4% 57.7% 79.5% 94.7% **unavailable Select MSAs with YOY Value Gains or Stabilization and Many Q2 Market Peaks Q2 Q2 When Zillow HVI % Change Market Home % Change from was last MSA Value (YoY) Market at Q2 (ranked by population Index Peak Level size) United States $206,919 -9.9% -13.3% 2004-Q4 Dallas-Fort Worth- Arlington, TX $138,944 0% 0% 2007-Q1 Pittsburgh, PA $117,782 0.6% 0% 2008-Q1 Tulsa, OK $111,888 3.9% 0% 2008-Q1 Oklahoma City $114,493 1.1% 0% 2008-Q1 Austin-Round Rock, TX $199,915 1.2% 0% 2008-Q1 Raleigh-Cary, NC $207,798 0.8% -0.6% 2007-Q4 Grand Junction, CO $226,586 4.9% 0% 2008-Q1 % Homes % % of % of Sold for Foreclosure(7) Purchases 2006(9) a Loss Transactions since Purchases MSA (Past 12 (Past 12 2003(8) w/ w/ (ranked by population size) months) months) Negative Negative Equity Equity United States 23.7% 14.5% 29.1% 44.8% Dallas-Fort Worth-Arlington, TX 9.7% ** 9.9% 9.8% Pittsburgh, PA 11% ** ** ** Tulsa, OK 13.7% ** 9.3% 7% Oklahoma City 11.2% 3.9% 11.6% 15.6% Austin-Round Rock, TX 4.8% ** 3.1% 1.5% Raleigh-Cary, NC 10.8% 6.5% ** ** Grand Junction, CO 4.4% 3.6% 1.2% 0.9% **unavailable About Zillow.com®
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(1) Zillow's data includes Zestimate valuations dating back to 1996. The 9.9% year-over-year depreciation calculated for Q2 was the largest drop from the prior-year period in Zillow's historical database. (2) The Zillow Home Value Index is the median Zestimate valuation for a given geographic area on a given day and includes the value of all single-family residences, condominiums and cooperatives, regardless of whether they sold within a given period. The Home Value Index at the national and MSA levels is calculated using a weighted average of the median home value for each county. It is expressed in dollars and is for a particular geographic region. (3) The data in Zillow's Real Estate Market Reports is aggregated from public sources by a number of data providers for 165 Metropolitan Statistical Areas dating back to 1996. Mortgage and home loan data is typically recorded in each county and publicly available through a county recorder's office. (4) Negative Equity indicates that the current home value as of June 30, 2008 is less than the original mortgage. To be conservative, principal payments and equity withdrawals since initial loan origination have been excluded from the analysis, which is consistent with standard reporting practices. (5) While many foreclosure transactions are included in the number of homes sold for loss not all are included, as there are foreclosed homes that sell for more than the foreclosed owner originally paid. (6) The survey was conducted online by Harris Interactive within the United States on behalf of Zillow.com between June 30, 2008 and July 2, 2008 among 2,067 adults ages 18+ of whom 1,361 are homeowners. A full methodology, including weighting variables, is available. (7) A foreclosure transaction is recorded after a homeowner is forced to surrender their deed to either the bank or a third party who buys the home at an auction. (8) Percentage of home purchases with negative equity in column indicates how many homeowners who purchased in each corresponding MSA from January 1, 2003 through June 30, 2008 have home values that are lower than the original loan amount as of June 30, 2008. (9) Percentage of home purchases with negative equity in column indicates how many homeowners who purchased in each corresponding MSA in 2006 now have home values that are lower than the original loan amount as of June 30, 2008.
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