Current Events, Foreclosures, Home Prices, Jingle Mail

Home values drop, nearly 1/3 underwater

From the Originator Times:

U.S. home values in the second quarter posted the largest year-over-year decline in the past 12 years, dropping 9.9 percent from the year-ago quarter and 1.7 percent from the first quarter to a U.S. Zillow Home Value Index (HVI) of $206,919, according to the Q2 Zillow Real Estate Market Reports. The median U.S. home value has not been this low since the fourth quarter of 2004, leaving nearly one-third (29.1%) of homeowners who purchased since 2003 with negative equity.

Zillow expanded its Real Estate Market Reports this quarter, adding a number of new measures to monitor 165 metropolitan statistical areas (MSAs), which is the largest sample of markets by any housing report. The significant majority of MSAs (140) lost value since the second quarter of 2007 and those in some of the hardest hit markets have seen more than one-third of their home’s value lost in the past year. For example, the Zillow Home Value Index in Stockton, Calif. fell 38.2 percent from the year-ago quarter while the Las Vegas, Los Angeles and Miami areas have fallen 27.4 percent, 21.4 percent and 20.8 percent respectively.

Not surprisingly, homeowners who have experienced the most significant value declines are at most risk of being underwater on their mortgages — meaning they owe more than their home is currently worth. Nationwide, for those who purchased their home since the beginning of 2003, nearly one in three (29.1%) now have negative equity. The highest rates of negative equity are among those who purchased in 2006, when most markets peaked, as nearly half (45%) of those buyers across the U.S. now face negative equity after placing a median down payment of 10 percent. The rate is nearly double for those in the Stockton MSA where nearly every homeowner (95%) who bought in 2006 — with a median down payment of zero — is underwater.

With home prices expected to continue to decline, the number of homeowners who owe more than their property is worth is expected to balloon - and at some point, it becomes a purely financial decision for some simply to walk away. Even those with pristine credit and prime mortgages eventually may reach that point where it makes more sense to walk, rather than continue to make payments on a depreciating asset.

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