Residential property values fell just 0.2% quarter on quarter according to Zillow's third quarter Real Estate Market Reports. It also shows prices are down 4.4% year on year and down 28.8% since they peaked in June 2006.
A lower rate of foreclosure liquidations coupled with relatively flat home values caused negative equity to rise in the third quarter with 28.6% of single family home owners with mortgages underwater, compared to 26.8% in the second quarter.
A home owner is in negative equity when they owe more on their mortgage than their home is worth. While the pace of foreclosures has slowed, liquidations remained high in September, with 8.7 out of every 10,000 homes being liquidated.
Regionally, home values have weakened in the majority of the metropolitan statistical areas (MSAs) covered by Zillow, with 105 out of 157 markets declining from the second to the third quarter. Comparatively, 66 out of 157 markets declined between the first and second quarters of this year.
Several markets, including Washington and Fort Myers, Florida, saw declines this quarter after two consecutive quarters in positive territory. However, there are signs of stabilization in some of the hardest hit markets in Michigan. Ann Arbor, Grand Rapids, Detroit and Lansing have all seen at least two quarters of appreciation.
‘The peak summer home buying season is over for the year, with fewer home sales to show for it than one would expect based solely on the underlying fundamentals of price and financing costs. Home affordability is at historic lows courtesy of a large reset in home prices and continued low mortgage rates,’ said Zillow chief economist Stan Humphries.
‘We're clearly dealing with a crisis of confidence that is keeping potential buyers on the sidelines, fuelled largely by high unemployment and more general economic uncertainty,’ he explained.
‘That said, given the steady drumbeat of recent negative economic news, home values held up better than would be expected. We have been forecasting a housing bottom in 2012, at the earliest, and third quarter data further confirms this forecast,’ he added.
