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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® Q1 2008 Home Value Report
May 6, 2008
SEATTLE, May 6 /PRNewswire/ -- 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® 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.
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Zillow® 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. Highlights for select MSAs from the Zillow reports can be found below:
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.
% of 2006 (5)
MSA Zindex Purchases Median
(ranked by Q1 Zindex Change now w/ Down
population Zindex Change (5-year Negative Payment
size) Value (YoY) annualized) Equity (6) (2006) (5)
United States $213,000 -7.7% 4.7% 51.6% 10%
Los Angeles-Long
Beach-Santa
Ana, CA $482,500 -16.4% 6.2% 71.6% 5%
Detroit-Warren-
Livonia, MI $148,000 -15.9% -4.5% 70.9% 10%
Miami-Fort
Lauderdale-Miami
Beach, FL $235,500 -18.8% 7.2% 77.2% 5%
Riverside-San
Bernardino-
Ontario, CA $287,500 -26.0% 5.8% 88.5% 0%
Sacramento-Arden-
Arcade-Roseville,
CA $289,500 -20.5% 1.5% 69.4% 10%
Las Vegas-Paradise,
NV $215,000 -25.2% 6.5% 89.9% 2%
Stockton, CA $244,000 -33.5% 0.3% 95.8% 0%
When
MSA Market
(ranked by was last
population Market % Decline at Q1
size) Peak from Peak Level
United States 2006-Q3 -9% 2005-Q2
Los Angeles-Long
Beach-Santa
Ana, CA 2006-Q2 -19% 2004-Q4
Detroit-Warren-
Livonia, MI 2005-Q4 -24% 1998-Q4
Miami-Fort
Lauderdale-Miami
Beach, FL 2006-Q3 -24% 2005-Q1
Riverside-San
Bernardino-
Ontario, CA 2006-Q3 -29% 2004-Q2
Sacramento-Arden-
Arcade-Roseville,
CA 2005-Q4 -30% 2003-Q4
Las Vegas-Paradise,
NV ** ** **
Stockton, CA ** ** **
**unavailable
Select MSAs with Year-Over-Year Value Gains or Stabilization with Negative Equity Less than 50%
While the majority of markets reported year-over-year declines, 30 of the 160 MSAs returned positive appreciation during the same period. Most of these appreciating markets peaked in late 2006 or later and have rates of negative equity below the national median.
% of 2006 (5)
MSA Zindex Purchases Median
(ranked by Q1 Zindex Change now w/ Down
population Zindex Change (5-year Negative Payment
size) Value (YoY) annualized) Equity (6) (2006) (5)
United States $213,000 -7.7% 4.7% 51.6% 10%
New York-Northern
New Jersey-Long
Island,
NY-NJ-PA $418,500 -1.4% 4.5% 32.0% 10%
Dallas-Fort
Worth-
Arlington, TX $130,500 1.1% 2.0% ** **
Pittsburgh, PA $105,500 -1.9% 2.6% 27.5% 20%
Virginia Beach-
Norfolk-Newport
News, VA-NC $220,000 -1.6% 12.2% 17.6% 20%
Oklahoma City $104,500 5.0% 5.6% 27% 3%
Raleigh-Cary, NC $220,000 3.8% 5.5% 7.6% 9%
Grand Junction,
CO $219,000 3.7% 9.4% 0.8% 5%
When
MSA Market
(ranked by was last
population Market % Decline at Q1
size) Peak from Peak Level
United States 2006-Q3 -9% 2005-Q2
New York-Northern
New Jersey-Long
Island,
NY-NJ-PA 2006-Q3 -4% 2005-Q3
Dallas-Fort
Worth-
Arlington, TX 2007-Q3 -2% 2007-Q2
Pittsburgh, PA 2007-Q3 -7% 2006-Q1
Virginia Beach-
Norfolk-Newport
News, VA-NC 2007-Q3 -2% 2006-Q3
Oklahoma City ** ** **
Raleigh-Cary, NC ** ** **
Grand Junction,
CO ** ** **
**unavailable
NOTE TO REPORTERS/EDITORS: Dr. Stan Humphries of Zillow will host a conference call this Tuesday, May 6 at 11 a.m. PDT/2 p.m. EDT. To participate, dial 800-218-0713. To download call-related slides, visit the Zillow Press Room at http://zillow.mediaroom.com/ on May 6. In addition, media may request more localized data and graphics through Zillow PR:press@zillow.com.
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® 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.
Zillow.com, Zillow, Zestimate and Zindex are registered trademarks of Zillow, Inc.
(1) Zillow's data includes Zestimate valuations dating back to 1996. The
7.7% year-over-year depreciation calculated for Q1 was the largest
drop from the prior-year period in Zillow's historical database.
(2) 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
single-family residences, condominiums and cooperatives, regardless of
whether they sold within a given period. The Zindex at the national
and MSA levels are 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 Home Value Reports is aggregated by a number of
data providers for 160 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 is less than the
original mortgage as of March 31, 2008. To be conservative, principal
payments since initial loan origination have been excluded from the
analysis, which is consistent with standard reporting practices.
(5) Negative equity and median down payment information in press release
tables is calculated based on homes purchased in each corresponding
MSA during the 12-month period ending Dec. 31, 2006.
(6) Percentage of home purchases with negative equity indicates how many
homeowners who purchased in 2006 have home values that are lower than
the original loan amount as of March 31, 2008.
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SOURCE: Zillow.com
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