Rising foreclosures and soft economic data were the main culprits behind accelerated declines in home values during the fourth quarter. According to the Q4 Zillow Real Estate Market Reports, released today, national home values fell 1.1 percent from the third to the fourth quarter, representing an annual decline of 4.7 percent. Overall, national home values have fallen 24.2 percent since their peak in May 2007. The newly released Zillow Home Value Forecast, however, points to brighter days in the future for many markets.

According to the Zillow Home Value Forecast, national home values will decline less in 2012 than in 2011, ending the year down 3.7 percent. While the Forecast does not show a bottom in home values nationally this year, home values in some individual markets are likely to reach a bottom. In the Washington and Los Angeles metropolitan statistical areas (MSAs), the Forecast shows home values increasing by 1.3 and 1.2 percent, respectively, by the end of the year.

Additionally, markets like Riverside, Calif., Phoenix and Baltimore MSAs will likely reach a bottom in home values in 2012.

“As previously stated, we believe 2012 will be a transitional year for real estate. Positive developments will include markets showing organic growth, and home sales increasing as the year proceeds. However, we maintain our forecast that home values will continue to fall in 2012, ” said Zillow Chief Economist Dr. Stan Humphries on the Zillow Research page. “Negative equity will continue to cast a long shadow over the real estate market, keeping foreclosure rates elevated, and keeping a firm lid on significant home value growth even once values have bottomed in 2013.”

New to this quarter’s report, the Zillow Home Value Forecast uses data from past home value trends and current market conditions, including leading indicators like home sales, months of housing inventory supply and unemployment, to predict home values over the next 12 months for the nation and the 25 largest markets tracked by Zillow.


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