Underwater Housing
by Tom on November 9, 2009
in Market Musings, house prices
An interesting report from Zillow on underwater housing. A couple of thoughts about it:
- It appears that part of the reason the percentage of underwater housing is dropping is because banks are foreclosing on more homes. I guess if you’ve lost your home, you don’t have a negative equity situation any more.
- The other reason is because the first time home buyer stimulus did exactly that, it generated interest and additional sales.
It also raises questions, though, what the report is going to look like going forward. Are we just borrowing 2010 sales into 2009? 2011 Sales? What does that leave for next year?
The next 6 months will prove to be interesting……
Tom Vanderwell
Zillow indicated that, although more underwater mortgages dropped into foreclosure, home values stabilized somewhat in the quarter.For the 11th consecutive quarter, home values shrank, falling 6.9% compared to the same time period last year. But the rate of decline narrowed in Q309, meaning home values did not fall as dramatically year-over-year as they did in the second or first quarters, according to the report.
Zillow’s Home Value Index flattened in Q309, dropping 0.4% from the end of the second quarter. The Index measures home values in 156 metropolitan statistical areas (MSAs).
Real estate owned (REO) property sales remained high, accounting for 21.4% of all US home sales in September. REO sales took up 74.2% of sales in Merced, Calif., 69.3% of sales in Stockton, Calif. and 67.5% of activity in Las Vegas. The report also added that 26.9% of homes sold for less than what the seller originally paid.
Stan Humphries, Zillow’s chief economist, said that a combination of stabilizing home values and foreclosures spurred the decline of homeowners strapped with negative equity.
“The next several months will be critical to the housing market. Previously, we’d been expecting to see increasing foreclosure rates during the real estate market’s slow winter season, a confluence of events that would likely drive inventory up and prices down,” Humphries said. “But now, with the extension of the $8,000 first-time homebuyer tax credit and a new $6,500 credit for some repeat homebuyers, we could see a bump in demand that could partially offset the increased supply of foreclosed homes on the market.”
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