Homes are continuing to lose value, according to Zillow’s First Quarter Real Estate Market Reports, falling 3 percent quarter-over-quarter, and 8.2 percent year-over-year. The pace of declining values is quickening. Values are falling at rates not seen since the height of the financial crisis in 2008. Zillow’s metrics show home values down 29.5 percent overall from the peak, with the average home going for $169,600.
Zillow chief economist Stan Humphries said conditions forced the company to downgrade its housing outlook for 2011:
“Because of the strong depreciation in the first quarter, we’ve revised our forecast for the total home value decline nationally in 2011 to 7-9 percent (previously 5-7 percent) and our forecast of the bottom from late 2011 to 2012 at the earliest. As always, our expectation post-bottom (where we define the bottom as the end of consistent monthly depreciation) is for a long period of below-normal real estate appreciation during which time we work out the remaining overhang of excess housing supply.”
Humphries said weak demand for housing and high supply will ultimately drive these price declines, which is not really news to anyone, but confirms what we (and many other sources) have been saying for months now. Two million homes are in the foreclosure process and about another 1.5 million are seriously delinquent.
Negative equity is now at an all-time high, with 28.4 percent of single family homes with mortgages underwater. This is particularly bad, as underwater homeowners are far more likely to default on their mortgages than those with home equity. Increasingly these underwater homeowners (or the banks that repossessed their homes) appear to be cutting their losses, with 37.3 percent of homes sold in March were sold at a loss. Foreclosures now comprise 23.7 percent of all sales, up from 17 percent in March 2010.
Falling home values will continue to restrain whatever economic recovery is occurring (if indeed one is occurring at all, and I’m skeptical that it is, unless you manage a hedge fund).
Loading ...
James
January 4, 2012 @ 11:47 pm
The housing market will take a big tumble, especially larger homes when all the baby boomers have to sell up for retirement. They all hope to sell for a profit, buy some two bedroom downsized house in a village and live happy ever after. Wont happen. So many larger houses on the market will depress house prices, so few village houses will increase there prices. In the end, because so few pensioners will actually be able to emigrate or downsize, they will find their homes around their necks, keeping them broke on their miniscule pensions. We are heading into another Dickens England full of poor pensioners, poorly paid workers, unemployed welfare receiving immigrants along with failing schools, NHS and rising violent crime. All effecting house prices and national morale.
Reply