Record-Breaking Declines in First Quarter
By: Stan Humphries, Chief Economist | May 6, 2008
Conditions continued to worsen in Q1 as U.S. home values continued their slide down with the Zindex posting a 7.7% year-over-year decline, the sharpest decline we’ve ever seen in our data, which extends back to 1996. Not surprisingly, the market decline brought with it increasing rates of negative equity, with one out of two homeowners who purchased during the national market peak in 2006 currently “underwater” on their mortgage, or owing more on their mortgage than the home is currently worth. Even more alarming is the finding that almost 45% of homeowners who purchased last year (2007) are already underwater on their mortgages, a fact that drives home the rapidity of the market depreciation.
Hardest hit areas in terms of value declines included many parts of California and Florida as well as the metropolitan areas of Las Vegas and Phoenix. The Los Angeles MSA was down 16% year-over-year and down 19% from its market peak in 2006. Values in the Los Angeles area have retreated to levels last seen in fourth quarter 2005, and almost 72% of LA-area homeowners who purchased in 2006 at the market peak, now have negative equity. In the Orlando MSA, prices are down 23% from the market peak in 2006 and down 19% on a year-over-year basis. Among homeowners who purchased at the peak, almost 75% have negative equity in their homes currently.
While we’re clearly in a period of market correction, it’s interesting to note that these large declines are beginning to bring five-year annualized appreciation rates in these markets back down into the range of historical norms. For example, Las Vegas metro posted a 25% year-over-year decline in Q1 2008 but the five-year annualized rate is still 6.5%. The Tampa MSA reported a 17% decline this quarter but still has a 5.5% annualized rate over the past five years. There are, of course, some areas where recent market declines have more substantially dented longer term performance, for example, in Merced, California where the current year-over-year decline is 34% and recent losses have completely wiped out returns over five years (five-year annualized rates of 0%).
There do continue to be bright spots amidst the larger backdrop of widening market deterioration. Many of the bright spots are in the South and Midwest, which for the most part managed to avoid the tremendous, and ultimately unsustainable, appreciation many other parts of the country saw in the first half of the decade. The Charlotte MSA was up 1.8% YoY, Dallas metro was up 1.1% YoY and the Oklahoma City MSA was up 5% YoY. Overall, however, more markets continue to join the ranks of down markets with 130 of the 160 metro areas in our analysis this quarter reporting negative year-over-year performance. Of particular concern is the fact that the magnitude of home value declines has been increasing during each of the last five quarters, a strong indication that home values still have further to fall.
To download graphics and spreadsheets for the national report or one of our 160 local reports, visit http://www.zillow.com/quarterlies/QuarterlyReports.htm.
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New Mortgage Section at Homethinking | Bronte Media on May 6, 2008 2:30 pm
[...] Why is 2006 important? Many of the subprime loans have low introductory rates that reset usually on a 2 year timeline (i.e. this year). Many home owners had hoped their homes would have appreciated in value so that rather than paying the high interest rate they reset to, they could simply refinance and get a more traditional mortgage because they had built home equity. Zillow came out with some great data on how that’s turning out. [...]
If you bought in 2006 its 50/50 you’re underwater on May 7, 2008 12:13 am
[...] Zillow and their take on the housing market: Conditions continued to worsen in Q1 as U.S. home values continued their slide down with the [...]
If you bought in 2006 its 50/50 you’re underwater on May 7, 2008 12:13 am
[...] Zillow and their take on the housing market: Conditions continued to worsen in Q1 as U.S. home values continued their slide down with the [...]
“Not My House!” | Zillow® Blog on May 7, 2008 8:00 am
[...] Record-Breaking Declines in First Quarter [...]
Arizona Mortgage Guru » Don’t Let Zillow’s Market Report Make You Cry on May 7, 2008 7:53 pm
[...] Zillow published some stunning numbers yesterday regarding the US housing market. According to their analysis they believe “one out of two homeowners who purchased during the national market peak in 2006 currently “underwater” on their mortgage”. This is a lot of people, and it does not appear to let up too much in 2007 either, because they claim “45% of homeowners who purchased last year (2007) are already underwater on their mortgages”. [...]
If you bought in 2006 its 50/50 you’re underwater | Real Estate Blog on May 7, 2008 9:17 pm
[...] Zillow and their take on the housing market: Conditions continued to worsen in Q1 as U.S. home values continued their slide down with the [...]
property bulgaria on May 8, 2008 5:08 am
The ups and downs in the financial markets have by no means brought the M&A market to a halt; they have, however, redefined the opportunities the market makes available,” Mr. Steever summarized. “Now that the stock market has sloughed off the ‘acquisition premium’ that had kept it high, a number of well-run companies are attractively priced—but probably not for too long
Santa Barbara Real Estate Voice on May 8, 2008 10:17 am
Amazing to see this. We have for sure seen our fair share here in the Goleta and Carpinteria areas of Santa Barbara.
http://www.SantaBarbaraRealEstateVoice.com
Equity Conversion Plan » If you bought in 2006 its 50/50 you’re underwater on May 8, 2008 10:48 pm
[...] Zillow and their take on the housing market: Conditions continued to worsen in Q1 as U.S. home values continued their slide down with the [...]
The Zindex Illusion or How to Sell A Housing Report Without Using Actual Home Sales on May 11, 2008 10:14 pm
[...] Stan Humpries post at the Zillow Blog: Conditions continued to worsen in Q1 as U.S. home values continued their slide down with the [...]
Don’t Let Zillow’s Market Report Make You Cry at Arizona Mortgage Review on May 13, 2008 1:18 am
[...] Zillow published some stunning numbers yesterday regarding the US housing market. According to their analysis they believe “one out of two homeowners who purchased during the national market peak in 2006 are currently “underwater” on their mortgage”. This is a lot of people, and it does not appear to let up too much in 2007 either, because they claim “45% of homeowners who purchased last year (2007) are already underwater on their mortgages”. [...]
If you bought in 2006 its 50/50 you’re underwater | Bond 4 Title on May 13, 2008 11:49 pm
[...] Zillow and their take on the housing market: Conditions continued to worsen in Q1 as U.S. home values continued their slide down with the [...]
Zillow Poll Reflects Mood | Zillow® Blog on June 5, 2008 11:31 am
[...] The poll with the second-most votes (1,499 at this writing) is “What is the longest amount of time you’ve spent in one home (as a child or adult)?” which is not super-riveting or a reflection of the times — it’s just a whimsical little question. Back to reality with the third-most votes: “In 2008, US home prices will…” The answers there are a bit more optimistic even though nationally, the market slumped by 7.7%. [...]
Real Estate Radio USA Episode 146 | Real Estate Radio USA on June 26, 2008 3:30 pm
[...] sponsorship of the Bloodhound Unchained event, managing the Zillow corporate reputation, Zillow’s Quarterly Home Value Reports, and what we can expect to see from Zillow in the coming [...]
Henderson Real Estate | Las Vegas Homes & Real Estate on October 6, 2008 7:40 am
[...] country as a whole began to experience a recession. The fall continues through 2008 as a result of record-breaking declines in home value rates. The median price for an average home is now nearly $200,000 less than what one would have paid [...]
Scott on October 28, 2009 11:06 am
There are still some great buys in Santa Barbara, CA. I have compiled a list of the best buys in town. Check out my website http://www.scottmccosker.com.