Housing Double Dip Piling On: Zillow Weighs In

May 9th, 2011
in econ_news

house-for-sale Econintersect:  Home values in the United States fell faster in the first quarter of 2011 than they have in any quarter since 2008, when the housing market experienced its worst performance, according to Zillow's first quarter Real Estate Market Reports. The Zillow Home Value Index fell 3 percent from the fourth quarter of 2010 to the first quarter of 2011, and declined 8.2 percent year-over-year to $169,600. Zillow indicates home values have fallen 29.5 percent since they peaked in June 2006.

Follow up:

This new data follows Friday's data release for April from Clear Capital was reported earlier by GEI News.  The data release by Zillow this morning (Monday May 9) adds some more dark paint to the double dip portrait. 

Negative equity reached a new high mark with 28.4 percent of single-family homeowners with mortgages underwater at the end of the first quarter, up from 27 percent in the fourth quarter of 2010. A homeowner is in negative equity when they owe more on their mortgage than their home is worth.  CoreLogic reported negative equity at 23.1% for 4Q/2010, a significantly lower number than Zillow.

Meanwhile, foreclosures rose throughout the first quarter as banks unfroze moratoriums and allowed foreclosures to resume. Foreclosures had fallen in late 2010 due to the slew of moratoriums brought about by the "robo-signing" controversy. In March, one out of every 1,000 homes in the country was lost to foreclosure.  Robo-signing has been discussed at GEI Analysis by Yves Smith and Daniel Tarullo

With substantial home value declines, as well as increasing negative equity and foreclosures, Zillow forecasts show it is unlikely that home values will reach a bottom in 2011. First quarter data has prompted Zillow to revise its forecast, now predicting a bottom in 2012, at the earliest.

"Home value declines are currently equal to those we experienced during the darkest days of the housing recession. With accelerating declines during the first quarter, it is unreasonable to expect home values to return to stability by the end of 2011," said Zillow Chief Economist Dr. Stan Humphries. "We did expect substantial payback from the homebuyer tax credits, which buoyed the housing market last year, but underlying demand post-tax credit, as well as rising foreclosures and high negative equity rates, make it almost certain that we won't see a bottom in home values until 2012 or later."

Very few markets were exempt from home value declines in the first quarter. The vast majority (97 percent) of the 132 markets covered by Zillow logged home value declines. Only the Fort Myers, Fla., Champaign-Urbana, Ill. and Honolulu, Hawaii metropolitan statistical areas (MSAs) experienced quarterly increases, with home values rising 2.4 percent, 0.8 percent and 0.3 percent, respectively. Home values in the Sarasota, Fla. MSA remained flat.

Here is the data table provided by Zillow:


The data from Zillow reinforces the information obtained in an interview withreal estate expert Keith Jurow regarding the Clear Capital data reported in the GEI News housing article this morning.  Jurow has since added a follow-on note to the interview:

"In reading the latest 10Q report from Fannie Mae, I found that 85% of their loans (owned or guaranteed) were originated in 2004 or later.  Given that many of the 2004-2006 loans were zero down payment 80/20 loans, what percentage of their portfolio do you suppose is now underwater?  My guess is roughly 60-65%."  

Jurow is the author of the subscription service Minyanville Housing Market Report. 

Jurow's observations indicate that the 28.4% of mortages underwater may not be the high point for that metric.

Sources:  prnewswireGEI News(Clear Capital), GEI Analysis (here and here) and  and GEI News (CoreLogic) 

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