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Home Values Near Unprecedented Decline as Hints of Stabilization Wane in Third Quarter

Percentage of Homeowners Underwater Reaches New Peak; Length and Depth of Housing Downturn Approach Depression-Era Declines According to Q3 2010 Zillow® Real Estate Market Reports

Nov 10, 2010

SEATTLE, Nov. 10, 2010 /PRNewswire/ -- The United States housing market continued its long decline in the third quarter with home values falling for the 17th consecutive quarter, according to Zillow Real Estate Market Reports(1). With home values 25 percent below their June 2006 peak, the current housing downturn is approaching Great Depression-era declines, when home values fell 25.9 percent in five years(2).



The Zillow Home Value Index(3) declined 4.3 percent year-over-year in the third quarter and 1.2 percent from the second quarter to $179,900.

Nearly one-quarter, or 23.2 percent of single-family homeowners with mortgages, were underwater on their mortgage in the third quarter, the highest it has been since Zillow began tracking negative equity in 2009. It rose from 22.5 percent in the second quarter.

In some markets, as many as four out of five single-family homeowners with mortgages were underwater on their mortgages in the third quarter. Las Vegas had the highest percentage, with 80.2 percent in negative equity, followed by Phoenix with 68.4 percent. In total, 11 markets tracked by Zillow had negative equity above 50 percent.

Home values fell from the second to the third quarter in 77 percent of markets covered in Zillow's report. In five of those markets – the California MSAs of Los Angeles, San Diego, San Francisco, San Jose and Ventura – home values began to fall again after five consecutive quarters of increases. Other markets that showed signs of stabilization in previous quarters also faltered, with home values flattening or becoming negative in large MSAs like Boston and Denver.

"While not unexpected, the unceasing declines in home values signal that we're in for a long, bleak winter of continued troubles for the housing market," said Zillow Chief Economist Dr. Stan Humphries. "The length and depth of the current housing recession is rivaling the Great Depression's real estate downturn, and, with encouraging signs fading, will easily eclipse it in the coming months.

"The high percentage of homeowners in negative equity continues to be troubling, in that it represents a huge number of people who are not only more vulnerable to foreclosure, but who are essentially trapped in their current homes and are prevented from selling and buying a new home. This has profound implications for future demand and will be a millstone around the neck of the housing market."


Largest 25 Metropolitan Statistical Areas Covered by Zillow

Zillow Home Value Index


Q3 2010

QoQ Change

YoY Change

Change from Peak

Negative Equity*


United States







New York, NY







Los Angeles, CA







Chicago, IL







Dallas, TX







Philadelphia, PA







Miami-Fort Lauderdale, FL







Washington, DC







Atlanta, GA







Detroit, MI







Boston, MA







San Francisco, CA







Phoenix, AZ







Riverside, CA







Seattle, WA







Minneapolis-St. Paul, MN







San Diego, CA







St. Louis, MO







Tampa, FL







Baltimore, MD







Denver, CO







Pittsburgh, PA







Portland, OR







Cleveland, OH







Sacramento, CA







Orlando, FL







*Negative equity refers to the % of single-family homes with mortgages.



As home values continue to fall, additional signs of trouble have emerged. Foreclosures(4) reached a new all-time peak, with 1.2 out of every 1,000 homeowners in the country losing their homes to foreclosure in September. Sales of homes previously foreclosed in the past 12 months reached a near-peak level in September, with foreclosure re-sales(5) making up more than one-fifth (20.1 percent) of all sales. The last time foreclosure re-sales reached similar levels was in March 2009, when they made up 20.5 percent of all sales.

Additionally, more than one-quarter (27.3 percent) of homes sold in September were sold for a loss, marking a near-peak level. Homes sold for a loss peaked in February 2010, with 27.7 percent.

The full national report, in its interactive format, is available at  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, renters, real estate agents and mortgage professionals find and share vital information about homes and mortgages. Launched in early 2006 with Zestimate® home values   and data on millions of U.S. homes, Zillow has since added homes for sale and homes for rent, a directory of real estate and lending professionals, Zillow Advice, Zillow Mobile apps and Zillow Mortgage Marketplace. One of the most-visited U.S. real estate websites, with more than 12.5 million unique visitors per month, Zillow's goal is to help people become smarter about homes and real estate in every stage of their lives -- home buying, selling, renting, 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 data in Zillow's Real Estate Market Reports is aggregated from public sources by a number of data providers for 145 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.

(2) Nominal home values fell in the five years between 1929-1933, declining a total of 25.9 percent, according to statistics from Irrational Exuberance by Robert J. Shiller, 2nd. Edition, Princeton University Press, 2005, 2009, Broadway Books 2006, also Subprime Solution, 2008. The Zillow Home Value Index began falling in July 2006, and has fallen 25 percent since the market peak.

(3) 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 and includes data from 440 metropolitan statistical areas. It is expressed in dollars and is for a particular geographic region.

(4) Foreclosures are defined as a Trustee's Deed Upon Sale or equivalent transaction.

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