And That Makes Seven in a Row: Real Estate Turns in Another Down Quarter
By: Stan Humphries, Chief Economist | November 12, 2008
Home values declined 9.7% in the third quarter of this year relative to their levels one year ago, according to Zillow’s Real Estate Market Reports. This marks the seventh consecutive quarter of negative year-over-year declines, each quarter turning in a greater negative annual change than the prior quarter.
New this quarter, the depth and duration of the housing downturn in some markets has translated into flat or negative five-year annualized appreciation rates. Twenty-seven of the 163 markets covered experienced negative five-year annualized value changes. For example, Stockton real estate has dropped 3.8% on an annualized basis since 2003 and Boston home values have dropped about one percent annualized over the past five years. Even worse, Detroit is teetering on the edge of seeing no appreciation over the past decade-home values have increased less than one percent on an annualized basis over the last ten years.
Overall there remain some daunting storm clouds on the horizon. Foreclosure rates remained high with 18.6% of transactions in the past year being foreclosures nationally. Moreover, we estimate that 14.3% of all single-family homes are in negative equity as of the end of the third quarter, a situation that makes it more likely a home will enter foreclosure versus being sold for a loss when a household encounters financial stress.
And, turning to financial stress, there are abundant signs that more households are encountering or will encounter such stress in the coming months as the economy enters a recession of unknown length, bringing with it job losses (the unemployment rate of 6.5% is at a 14 year high) and decreased consumer confidence (Consumer Confidence Index dropped 38% in October to its lowest level ever) which will serve to dampen consumer spending.
- Stumble it!
- Categories: Real Estate Analytics, Real Estate Industry
Comments
7 Comments so far
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DebtFree on November 12, 2008 3:48 pm
Glad to see the housing correction moving along nicely.
When home prices decline another 30 to 40% and hit bottom in 3-4 years, home prices will once again be in line with people’s incomes, and their ability to afford the homes in which they live:
graphics.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
The above link is to Robert Shiller’s home price chart for the last 100 years, which clearly illustrates how abnormal home prices became during the now-busted Housing Bubble.
GregC on November 12, 2008 9:18 pm
Would be interested to see you folks run your numbers by MSA against Case Shiller numbers. I notice some discrepancies in a few areas I track and wonder what the overall apples to apples by MSA and nationwide results would look like. It would give me more confidence in Zillow methodology and insular analytics and self-reporting of error rates if I could see some tie between the two data sets.
Brandon Green on November 13, 2008 10:58 am
On an optimistic note, at least most of the country does have a high percentage of homes with negative equity.
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Amy B (from Zillow) on November 13, 2008 1:25 pm
GregC,
Stan wrote a comparison of Zillow data methodology to Case Shiller earlier this year, you can find it here:
http://www.zillow.com/wikipages/Zillow-Home-Value-Index-vs-OFHEO-and-Case-Shiller
In case you’re interested, here is also a comparison vs. median sale price:
http://www.zillow.com/wikipages/Reasons-Why-Median-Sale-Price-is-Flawed
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