Home values in the United States extended their fall in the first quarter, with more than one in five homeowners now owing more on their mortgages than their homes are worth, real estate website Zillow.com said on Wednesday.Zillow says U.S. home prices have fallen 21.8% since the peak, while S&P/Case-Shiller says that as of Q4 2008 prices have fallen 26.7%. I don't know which source is more accurate.
U.S. home values posted a year-over-year decline of 14.2 percent to a Zillow Home Value Index of $182,378, resulting in a total 21.8 percent drop since the market peaked in 2006, according to Zillow's first-quarter Real Estate Market Reports, which encompass 161 metropolitan areas and cover the value changes in all homes, not just homes that have recently sold. ...
Declining home values left 21.9 percent of all American homeowners with negative equity by the end of the first quarter, Zillow said.
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 14.3 percent were underwater in the third quarter of last year, the reports showed.
Also, there's a new type of shadow inventory: people who would like to sell if the market improves.
Meanwhile, potential sellers appear to be holding back until evidence of an improved housing market. In a separate survey of homeowner sentiment, nearly one-third, or 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, the reports showed. ...The typical homeowner owns his house for about seven years. When you consider the fact that the housing market has been declining for almost 3-4 years (depending on whether you look at prices or sales), it's not surprising to see a buildup of homeowners who would like to sell when the market improves.
"Unfortunately, given the magnitude of the current rates of decline, we're still many months away from a bottom even as depreciation slows," [Dr. Stan Humphries, Zillow vice president of data and analytics] said. "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," Humphries said.
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Currently, where I live (rent) in Santa Barbara, near 2/3 of listings do not sell and are eventually withdrawn. How's that for shadow inventory? The bubble here extended all the way from 99 to 06, during which time home prices more than TRIPLED thanks to specuvestors and NINJA loans.
ReplyDeletethis isnt really surprising is it? In every past downturn, there have been people who just withdraw listings, wait for a better day. In this current downturn, it has been going on since 2006.
ReplyDeleteA few of them will return, but not enough to matter much. As it is with every other downturn, some will list, capitulate, & sell, - others will stay on the sidelines well after the market has improved.
Bottom line is this phantom inventory isnt new. Its been around since 2006, and yet even with more and more people, giving up and decliding to list, stated inventory is falling and falling fast.
If this percentage from Zillow is accurate, it means only that the impending wave of inflation will need to be *that much* higher.
ReplyDeleteIn other words, inflation is being engineered by Treasury and the Fed, right now. I'm not saying its right; I'm saying it is being engineered as a response to the flagging economy.
From my perceptions of this market, sweeping statements made on broad statistics do not accurately reflect market activity. What is currently driving the market is a huge disparity between communities where some are active and do not have significantly declining values, while others are severely depreciated.
ReplyDelete(Case in point: San Francisco Bay area where Menlo Park values are actually a little higher and Vallejo has a decline of about 70%. Even analysis in San Francisco shows wide variation in activity and price declines between neighborhoods).
The number is interesting in comparing relatively with previous years, but does not allow for any accurate conclusions to be drawn.
"A few of them will return, but not enough to matter much. As it is with every other downturn, some will list, capitulate, & sell, - others will stay on the sidelines well after the market has improved.
ReplyDeleteBottom line is this phantom inventory isnt new."
Yeah but whats new is that everytime they list, they have to list for $50K-$100K less than they did last time.
You can teach and old dog new tricks after all!!!
Anon,
ReplyDeleteYou miss Joe's point completely.
No I got his point. I was just pointing out the fact that the houses that go off the market and come back on only sell when they drop their price $100K the next time they list.
ReplyDeleteThe areas that have average median price gains, say like rockville MD, are due to the size of the new REO properties. Anywhere and everywhere has seen price of square footage tank.
When a 800 square foot home in Rockville is selling for $199K, and then a 2,000 square foot home put on the market gets listed for $400K it looks like the average just went up....but the issue is that 2,000 square foot home USED to go for $700K 2 years before.
prices are tanking everywhere, if one just adds things up and averages them out, you dont get the facts completely....so I agree with him on numbers dont always provide the full story. However prices are dropping and I love it.