The February Zillow Real Estate Market Reports come out today, and show continued depreciation in home values across much of the country. The national Zillow Home Value Index fell 5.4% year-over-year, and fell 0.5% month-over-month.

The good news is that the rate of monthly decline has improved over the past year. Home values fell 0.8% from January 2009 to February 2009, compared with a 0.5% decline from January 2010 to February 2010.

But the bad news is that, in early 2009, the rate of decline was shrinking (from -1% in January to -0.8% in February), signaling the market was heading toward a bottom. In the past few months, month-over-month changes are holding flat or getting worse – a trend which could slightly extend the time it takes to reach bottom. See Figure 1 for historical context.

Of the 25 largest markets for which we have data, two – Las Vegas and Philadelphia – saw positive month-over-month change, while another two – L.A. and San Francisco – remained flat. Additionally, almost 1 in 1,000 homes foreclosed in February, which is near the historical high-water mark. Foreclosure re-sales as a percentage of all transactions notched up again in February to 22.35%.

Current monthly changes in home values add substantial downside risk to our forecast that home values will reach bottom by June 2010. We’ve been expecting that monthly depreciation rates would stay negative but improve slightly in the first half of this year, but we’ve seen much less traction in reducing monthly depreciation rates than we expected.

Dr. Stan Humphries is a real estate economist and real estate expert for Zillow. Stan is in charge of the data and analytics team at Zillow, which develops housing market data for most major metropolitan statistical areas in the U.S., and provides economic research for current real estate market conditions. He helped create the algorithms for the popular Zestimate® home value and the Zillow Home Value Index (ZHVI).

About the Author

Stan is Zillow's Chief Economist. To learn more about Stan, click here.

  • Ralph D Bredahl

    It is difficult to make any predictions regarding when and where the is because so much of the current situation is uncharted water.

  • DebtFree

    Stan, do you believe housing prices are related to incomes?

    Are there any Zillow charts depicting median income vs median home prices for given locales?

    Here’s one for Los Angeles, for example:

    Given that median housing prices remain far above median incomes (which have been flat for a decade) it seems clear housing prices have MUCH farther to fall, as in 20-30% in coastal markets (Los Angeles, New York, etc).

  • Brian Porter

    In addition to the employment factor, we should keep a close watch on inflation and interest rates. If inflation goes up, so will real estate values; however, if interest rates go up, the real estate market will suffer.

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