More property owners are now in negative equity but foreclosure numbers are falling, according to the latest Zillow real estate market report covering the last quarter of 2010.
Home values posted their largest quarterly decline since the first quarter of 2009, falling 2.6% as the temporary stimulus of the home buyer tax credits wore off, according to the report. The Zillow Home Value Index declined 5.9% year on year in the fourth quarter to $175,200. Home values have now fallen 27% since they peaked in June 2006.
It also shows that at the end of the fourth quarter, 27% of single family homeowners with mortgages owed more on their mortgage than their homes were worth, up from 23.2% in the third quarter.
The bit of good news is that less than one in every 1,000, 0.09%, of US homes were liquidated in foreclosure in December, down from 0.12% in October when foreclosure liquidations peaked.
However, foreclosures are expected to increase again in early 2011, which may cause negative equity to fall as some underwater homeowners lose their homes to foreclosure and are no longer in negative equity, the report points out.
With the end of the homebuyer tax credits in the middle of 2010, home value declines accelerated toward the end of the year. When they were in effect, the credits tempered home values declines, nationally, home values fell only 0.9% from the first to the second quarter of 2010, but values resumed their decline after the credits’ expiration, falling 2.6% from the third to the fourth quarter.
‘While the tax credits did not hurt the housing market, they did delay its bottom by interrupting the housing correction that was taking place. 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,’ said Stan Humphries, Zillow chief economist.
‘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,’ he added.
The accelerated decline in home values brought trouble for home sellers, as more were forced to sell their home for less than they purchased it. The rate of homes selling for a loss reached a new peak in December, with more than a third, 34.1%, selling for a loss. The rate of homes sold for a loss has increased steadily for the past six months.
