Zillow released its fourth quarter Real Estate Market Report this morning, and the results, while not unexpected, were not good as the housing market continues to correct itself.
Home values declined 2.6 percent from the third quarter of 2010 to the fourth quarter, the largest such decline in nearly two years. This is largely a function of the huge supply of unsold homes and the continuing anemic demand for them (which is largely a function of continued high unemployment). Stan Humphries, Zillow chief economist commented:
“Home value trends in the fourth quarter remained grim, but the good news is that these declines, while painful in the short-term, mean we’re getting closer to the bottom. The housing recession is likely in its death throes, and we expect to see sales pick up in early 2011. That will lead the way to home values stabilizing and an eventual bottom later this year, although it will take several months of increased sales activity before values begin to respond.”
As home prices continue to decline, more and more homeowners with mortgages find themselves with negative equity. On average, 26.7 homes have lost 26.7 percent of their value since the peak of the market in 2006-7. Year-over-year, home prices are down 5.9% on average. Twenty-seven percent of all homes with mortgages in the United States are now underwater, up from 23.2 percent in the previous quarter. Phoenix has the highest rate of negative equity among major metropolitan areas, with nearly 70% of borrowers with mortgages finding themselves underwater. Orlando follows this at 62% of mortgaged homes underwater, while in Atlanta 54% of homeowners with mortgages are upside-down.
Foreclosures fell slightly in the fourth quarter as foreclosure moratoriums and delays were enacted as a result of the robo-signing crisis. While the crisis is far from resolved, banks are moving forward with foreclosures again. As I’ve written in the past, foreclosures are expected to peak in 2011. Moody’s predicts that foreclosures will set another record in 2011, increasing from 1.8 million to 2.1 million.
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