Press releases

More Than One Fifth of All American Homeowners Now Underwater on a Mortgage

May 6, 2009

Continued Declining Home Values Nationwide Contribute to Fast-accelerating Rates of Negative Equity;


But Some Hardest- and Earliest-Hit Markets Showing Improvement in Year-Over-Year Value Declines, According to Q1 2009 Zillow® Real Estate Market Reports


SEATTLE, May 6 /PRNewswire/ -- Home values in the United States fell again in the first quarter, posting a year-over-year decline of 14.2 percent to a Zillow Home Value Index(1) of $182,378, according to the first quarter Zillow Real Estate Market Reports(2), which encompass 161 metropolitan areas and cover the value changes in all homes, not just homes that have recently sold.




Declining home values left one fifth (21.9 percent) of all American homeowners with negative equity(3) by the end of the first quarter. By comparison, 17.6 percent of all homeowners owed more on their mortgage than their property was worth in the fourth quarter of 2008, and one in seven (14.3 percent) was underwater in the third quarter of 2008.


Nine consecutive quarters of declines have left eight regions - including the Modesto, Calif., Stockton, Calif. and Fort Myers, Fla. regions - with median value declines of more than 50 percent since those markets peaked. In 85 of the 161 markets covered in the report, the annualized change over the past five years is negative or flat.


But in an early sign of improvement, several hard-hit markets in California, like Los Angeles, San Diego and Modesto, have seen two or more consecutive quarters of smaller year-over-year declines in home values. In total, 17 markets have seen improvement for two or more quarters in year-over-year results.


In the Los Angeles metro area, for example, the Zillow Home Value Index fell 18.9 percent year-over-year, a smaller decline than the 20.8 percent and 20.7 percent declines seen in the third and fourth quarters of 2008, respectively. In San Diego, home values fell 18 percent year-over-year, after falling 19.1 percent and 18.9 percent in the third and fourth quarters of last year. Both markets have been hard-hit by the housing downturn: L.A.'s home values have fallen 33.6 percent since the peak of the market in the first quarter of 2006, and San Diego's have fallen 35.4 percent since that market's peak in the third quarter of 2005.


Meanwhile, potential sellers appear to be holding back until evidence of an improved housing market. In a separate survey of homeowner sentiment(4), one-third (31 percent) of homeowners said they would be at least somewhat likely to put their homes on the market in the next 12 months if they saw signs of a recovering real estate market.


"Slowing declines in select markets are a bright spot or, at least, what passes for one given current market conditions," said Dr. Stan Humphries, Zillow vice president of data and analytics. "Unfortunately, given the magnitude of the current rates of decline, we're still many months away from a bottom even as depreciation slows. Moreover, the additional information we have this quarter on 'shadow inventory,' with one-third of homeowners indicating they would like to put their home on the market if conditions improve, confirms our earlier fears that a bottom in home values could be quite protracted. By our calculations, this could translate into as many as 20 million homes that could seep into the market as prices stabilize, maintaining a constant stream of supply that far outpaces demand, thus keeping prices flat. I'm doubtful that we'll see the bottom until 2010, and thereafter it's increasingly clear that we're likely to have a long bottom before we see meaningful recovery in home values."


In the survey, 12 percent of homeowners said they would be "very likely" to put their home on the market if there was evidence the market was turning around, while 8 percent said they would be "likely," and another 12 percent said "somewhat likely." Of the homeowners who are at least somewhat likely to put their home up for sale, 71 percent would consider increasing home sales in their neighborhoods to be evidence of a market turnaround.


In other data, foreclosures(5) and short sales(6) remained steady in the first quarter. About one in five (20.4 percent) of all transactions in the previous 12 months were foreclosures, compared to 19.9 percent the previous quarter. Short sales made up 11.9 percent of all transactions in the previous 12 months, compared to 10.9 percent in the fourth quarter.


For more information, including the full national report and 161 local reports, visit



    Best- and Worst-Performing Markets in U.S.
                  Q1                           When       %
                Zillow         % of All   %    Market   Fore-    % of 2008
       MSA       Home    Q1     Homes   Change  was     closure  Trans-
    (ranked by  Value   ZHVI%    with   from   Last at  Trans-   actions
    population  Index   Change Negative Market Current  actions  that were
       size)    (ZHVI)  (YoY)   Equity  Peak   Level     (YoY)   Short Sales

     States   $182,378 -14.2%   21.9%  -21.8%  2004-Q1   20.4%    11.9%

                          Best-performing markets

     N.C.     $118,121  14.4%     n/a      0%  2008-Q4   16.8%     2.5%
    Oklahoma City,
     OK MSA   $118,446   5.1%    6.3%    0.0%  2008-Q4    4.9%     6.9%
     NY       $114,604   2.5%     n/a      0%  2008-Q4     n/a      n/a
     NC       $138,881   2.5%     n/a      0%  2008-Q4     n/a      n/a
     MD        $82,174   2.3%      5%   -2.2%  2007-Q1    6.1%     3.7%

                           Worst-performing markets

     CA       $301,793 -36.6%     32%  -56.5%  2000-Q2     46%     5.6%
     CA       $197,193 -34.1%   21.9%  -37.1%  2004-Q2     28%      10%
     CA       $175,484 -32.4%   51.1%  -57.5%  2004-Q4   45.4%     5.7%
     CA       $151,392 -32.1%   38.4%  -55.3%  2002-Q4   48.4%     3.3%
     CA       $235,385 -31.8%   46.5%    -51%  2005-Q4   44.3%     7.2%



About® is an online real estate marketplace where homeowners, buyers, sellers, real estate agents and mortgage professionals find and share vital information about homes and mortgages, for free. Launched in early 2006 with Zestimate® home values and data on millions of U.S. homes, Zillow has since added homes for sale, a directory of real estate and lending professionals, Zillow Advice and Zillow Mortgage Marketplace. One of the most-visited U.S. real estate Web sites, with more than seven million unique visitors per month, Zillow's goal is to help people become smarter about real estate in every stage of the home ownership process--home buying, selling, remodeling and financing. The company is headquartered in Seattle and has raised $87 million in funding., Zillow and Zestimate are registered trademarks of Zillow, Inc.


(1) 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.


(2) The data in Zillow's Real Estate Market Reports is aggregated from public sources by a number of data providers for 161 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.


(3) Negative equity indicates that the current home value as of March 31, 2009 is less than the original mortgage amount. 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.


(4) Full results of the Homeowner Confidence Survey will be released on May 14. The survey was conducted online by Harris Interactive within the United States on behalf of between April 6 and April 8, 2009 among 2,123 adults ages 18+, of whom 1,266 are homeowners. Unless otherwise indicated, all percentages are based out of homeowners who think the value of their home has increased, decreased or remained the same since this time last year. Percentages have been recalculated to exclude "not sure" or "don't know" responses, and to exclude homeowners who already had their home for sale. This online survey is not based on a probability sample and therefore no estimates of theoretical sampling error can be calculated. A full methodology, including weighting variables, is available.


(5) Foreclosure is a legal process by which a bank or lender sells or repossesses a mortgaged property because the borrower does not meet the requirements of the loan, typically by missing payments. Zillow identifies foreclosures as the transfer of ownership of a property that comes about because of the foreclosure process.


(6) A short sale is a sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes. To calculate short sales, Zillow looks at all properties that have loans and counts the number that were sold for less than the loan amount. We then exclude foreclosures and divide that number by the number of all transactions in an area to come up with the percent of all transactions that are short sales. Because there is little public records data regarding short sales, these could include instances when the homeowner sells their home for less than they owe on their mortgage and elect to pay the difference themselves.

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