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Home Values Flatten in Short Term; Yearly Declines Shrink, but High Rates of Foreclosure, Negative Equity Expected to Delay True Recovery

Some Markets Closer to Bottom; Bright Spots in California with Many Markets Showing Increased Sales, Several Quarters of Shrinking Home Value Declines, According to Q2 2009 Zillow® Real Estate Market Reports

Aug 11, 2009




SEATTLE, Aug. 11 /PRNewswire/ --


Key facts:

  • U.S. Home values fell 12.1 percent year-over-year, marking the 10th consecutive quarter of declines, however Q2 was the first quarter where national declines are not growing.
  • Total home sales fell 23.7 percent in June versus a year earlier. In the short term, total home sales rose 3.8 percent in June versus May.
  • Negative equity: More than one-fifth (23 percent) of all owners of single family homes with mortgages owe more on a mortgage than their home is currently worth.
  • Foreclosure re-sales made up 22 percent of all home sales in June.
  • Homes sold for loss: 29.2 percent of sellers sold homes in June for less than the previous purchase price.



Home values in the United States posted their 10th consecutive quarterly decline, falling 12.1 percent year-over-year to a Zillow Home Value Index(1) of $186,500, according to the second quarter Zillow Real Estate Market Reports(2). But for the first time since home values started to fall in 2007, the rate of year-over-year decline has shrunk slightly compared to the previous quarter, with home values falling 12.1 percent as opposed to 12.4 percent year-over-year in the first quarter. The Zillow Home Value Index measures the value of all homes in an area, and the Q2 Real Estate Market Reports encompass 161 metropolitan statistical areas (MSAs).




Home values have flattened significantly in the short term, with the Zillow Home Value Index falling 2.7 percent from the first quarter to the second quarter, and falling only 0.9 percent from May to June.


Nationally, the total number of home sales in June fell 23.7 percent versus a year earlier. However, total home sales rose 3.8 percent in June versus May. Additionally, in 39 markets, home sales increased year over year. Some of these larger markets include Miami-Fort Lauderdale, Los Angeles and Phoenix.


Despite encouraging signs in some markets, distress signals tracked by Zillow remain high, suggesting that for most U.S. metropolitan areas the bottom of the market has not yet arrived, at least in terms of home values.


Negative equity(3) remains high, with 23 percent of all owners of single family homes with mortgages owing more on their mortgage than their home is currently worth, relatively flat compared to 22 percent in the first quarter. Foreclosure re-sales(4) made up more than one-fifth (22 percent) of all home sales nationally in June, and 29.2 percent of all homes sold in June were sold for less than what the owner originally paid.


Meanwhile, 29 percent of homeowners say they would be at least somewhat likely to put their home on the market if they see signs of a turnaround, according to Zillow's second quarter Homeowner Confidence Survey(5), signaling an abundance of potential shadow inventory waiting in the wings.


"While we are encouraged by the increasing sales in many markets and the overall improvement in the rate of decline of the Zillow Home Value Index, I hesitate to be overly optimistic for the near future," said Dr. Stan Humphries, Zillow chief economist. "There are still many hurdles to true market recovery. Foreclosure re-sales are buoying overall sales numbers, but their low prices are keeping home values down. Reports of increasing mortgage defaults signal that foreclosures are likely to increase again and peak in mid-2010. With increasing unemployment and high rates of negative equity, we have a fertile breeding ground for even more foreclosures, which add to the already-high level of for-sale inventory that needs to be cleared before values begin to rise.


"While the abundance of affordable foreclosure properties is a boon for many first-time homebuyers, I don't believe we'll see significant recovery until demand-side fundamentals improve, and more move-up and move-across buyers re-enter the market."


A real estate market bottom may be closer in some areas than in others. Eighteen of 142 declining MSAs have posted at least three consecutive quarters of smaller year-over-year home value declines, signaling a true trend. Nine of those markets are in California, where housing markets have been hard-hit by foreclosures and declining values. Those markets are:


  • Los Angeles MSA
    • Home values there have fallen 34.8 percent from the peak of the market in 2006.
    • Sales were up substantially in June, rising 11.4 percent compared to the same time last year.
    • The Zillow Home Value Index fell 14.9 percent, compared to 18.6 percent in the first quarter.
  • San Diego MSA
    • Home values have fallen 35.7 percent since the peak of the market in 2005.
    • Sales were up 9.7 percent year-over-year in June.
    • The Zillow Home Value Index fell 14.5 percent year-over-year in Q2, compared to 18.1 percent in Q1.
  • Stockton, Calif. MSA
    • Home values have fallen 60.9 percent since the market peaked in 2006.
    • In June, sales were down 12 percent year-over-year.
    • The Zillow Home Value Index fell 29.9 percent in the second quarter, compared to 32.9 percent in the first quarter.
    • Foreclosures continue to be an issue, however, with 69.2 percent of all sales in June being foreclosure re-sales.
  • Other California markets with three consecutive quarters of shrinking year-over-year declines are:
    • Oxnard MSA
    • Santa Rosa-Petaluma MSA
    • Modesto MSA
    • Vallejo-Fairfield MSA
    • Yuba City MSA
    • Napa MSA



In total, 142 U.S. metropolitan areas experienced year-over-year home value declines, eight markets were flat, and 11 markets experienced year-over-year appreciation in home values.


                                                               Total   % of
                     Q2                    When                Sales  Single-
        MSA        Zillow   Q2       %     Market  Foreclosure (June   Family
    (ranked by      Home   ZHVI %  Change   was     Re-Sales    08   Mortgages
    population      Value  Change  from    Last at (% of all    vs.     with
       size)        Index  (YoY)   Market  Current  all June   June  Negative
                   (ZHVI)          Peak    Level    Sales)      09)    Equity

     States       $186,500  -12.1%  -22.3% 2004-Q1    22%      -23.7%  23%

                                  Best-performing markets

     N.C.         $120,600  13.4%  0%      2009-Q2    11.9%    n/a     16.2%
    Oklahoma City,
     OK           $118,700  4.8%   0%      2009-Q2    4%       n/a     14.9%
     NY           $112,300  4.5%   0%      2009-Q2    n/a      n/a     6.8%
     NC           $124,200  4.4%   0%      2009-Q2    n/a      n/a     18.4%
     GA           $139,100  4.2%   -15.5%  2005-Q2    n/a      n/a     22.1%

                              Worst-performing markets

    Merced, CA    $106,500  -40.2% -69.1%  2000-Q2    77.4%   22.4%    72.2%
    El Centro, CA $117,400  -37.6% -53.8%  2001-Q1    64.3%   -27.8%   50%
    Las Vegas, NV $140,500  -34.6% -53.9%  2001-Q4    66.9%   39.8%    82.5%
    Madera, CA    $144,400  -33.8% -54%    2002-Q3    71%     63.4%    46.6%
    Modesto, CA   $140,500  -31%   -61.6%  2001-Q1    68%     0.5%     72.9%


The full national report, in its new, interactive format, will be available at on Tuesday, Aug. 11. Additionally, in most areas data is available at the state, metro, county, city, ZIP and neighborhood level.


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 eight 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 level 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 June. 30, 2009 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. This metric looks at negative equity of single-family homes with mortgages.

(4) Foreclosure re-sales captures mostly sales of bank-owned (REO) homes. It measures sales of homes that were foreclosed on in the previous 12 months.

(5) The survey was conducted online by Harris Interactive within the United States on behalf of between July 7 and July 9, 2009 among 2,258 adults ages 18+, of whom 1,600 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" and/or not applicable 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. The full survey will be released on Aug. 18.





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