July Data Shows Continued Improvement in Home Value Trends

Home values continued to show encouraging signs in new data released for the July 2009 time period with the Zillow Home Value Index (ZHVI) down 9.9% from its level one year ago compared to a 10.5% and  11.9% annualized depreciation rate at the end of June and the end of the first quarter of 2009 respectively.  While home values nationally are now down 21% from their peak in the second quarter of 2006, July marked the sixth consecutive month of improvement in the annualized depreciation rate for the nation.  The ZHVI was down 0.4% from June so home values were still not flat on a sequential basis.

Twelve of the twenty-six top markets shown in the table below turned in flat or positive month-over-month appreciation in July and eight of the markets had six or more consecutive months of improvement in their rate of annual depreciation (Atlanta, Boston, Los Angeles, Miami, Riverside, San Diego, San Francisco, and Washington D.C.).  All twenty-six markets showed decreases in the list-to-sale price ratios over the course of the 2009 home shopping season, an indication that some combination of increasing home sales and aggressive pricing by sellers resulted in decreased discounts between the last listing price and the final selling price of homes.

Some of the hardest-hit metropolitan areas continued to show weakness.  The ZHVI for Las Vegas, down 53% from peak, was down 32% from July of last year (and 3.1% from June 2009) and still hasn’t seen improvement.  Moreover, the percent of all homes in Las Vegas that were foreclosed in the month has been increasing again for the past two months after several months of decline.  Similarly, depreciation in Phoenix (down 46% from peak) has stabilized but the metro area is still reporting a 25% decline in homes values from levels last year and the percent of foreclosed homes is also rising again.  Riverside (down 52% from peak), Miami (down 45% from peak), and Tampa (down 41% from peak) are seeing some improvement in annualized depreciation rates albeit their rates are still quite high (-26%, -21% and -20% respectively) and all three still show substantial declines from the prior month (-1.6%, -1.0% and -1.1% respectively).

In almost all markets, the worrisome trend to watch is increasing numbers of foreclosures.  While the foreclosure re-sale rate (sales of foreclosed homes as a percentage of all sales) is declining in most markets, this is mostly attributable to increases in the total number of homes sold, not a reduction in the number of foreclosures.  Looking instead at the number of homes being foreclosed as a percentage of all homes, most markets are showing a resurgence now in foreclosures.  Indeed, even the foreclosure re-sale rate is expected to climb again in most markets as home sales begin to decline in the fall and winter (home sales will taper off seasonally but foreclosures will continue to pick up steam).  It’s for this reason (combined with the overall high levels of for-sale inventory still present in many markets) that we expect the monthly change in ZHVI to continue to remain negative for the next few quarters although we expect annualized depreciation rates to continue to moderate.

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