Zillow Sees Early Signs of Double Dip in Home Values

image Home values across the country declined again in the 4Q of 2009, marking the 12th consecutive quarter of year-over-year declines according to the latest Zillow Real Estate Market Reports.

In one in five, or 29 of the 143 markets tracked by Zillow, home values have flattened or have begun to decrease again after showing at least five consecutive monthly increases during 2009 – early signs of what could become a ‘double dip.’

Home values in an additional 29 markets, including the Los Angeles and New York MSAs, increased on a month-over-month basis each month throughout the fourth quarter. However, the rate of increase slowed from November to December in 21 of those markets, and several appear likely to experience several months of sustained decline in early 2010.

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The percent of single family homes with mortgages in negative equity was essentially flat from the third to the fourth quarter, changing from 21 percent in Q3 to 21.4 percent in Q4. This comes after a decrease in negative equity from the second quarter’s 23 percent.

The number of homeowners losing their homes to foreclosure across the country reached a peak in December, with more than one in every thousand homes being foreclosed – a number not reached since Zillow began recording national foreclosure data in 2000.

"While we have seen strong stabilization in home values during 2009, there are clear signs that they will turn more negative in the near-term," said Zillow Chief Economist Stan Humphries. "What we saw in mid-2009 was a brief respite from a larger market correction that has not yet run its course. The good news is that, for those markets that will see a double dip in home values before reaching a definitive bottom, this second dip will not be a return to the magnitude of depreciation seen earlier, but rather will look more like a modest aftershock of the earlier downturn.

"The recent stabilization owed a lot to policy support in the form of tax credits, lower interest rates and increased Federal Housing Administration lending. The remaining correction in home values we’ll see in the first half of this year is a function of market fundamentals, such as the increasing flow of foreclosures, high levels of inventory in the market and a probable decrease in demand as the impact of the tax credit wanes and mortgage rates rise. While the next few months are likely to bring further home value declines in most markets, we do expect to see a national bottom in home prices by the middle of this year. Thereafter, home values are likely to bounce along the bottom with real appreciation remaining negligible for some time."

Continued High Negative Equity and Home Value Declines Put a Damper on an Encouraging 2009

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  • Talking about optimistic…. But at least they are not as bad as the National Association of Realtors.

    The two main questions at hand are 1) how soon will the shadow inventory be forced into the market (and at what rate) and 2) how long can the pent up inventory be held back.

    Summer is normally a peak time for residential sales. Most of us believed that mid 2009 would have been and was a time when market movement slowed the decline in prices.

    People in some parts of the country will be astonished by the further deterioration this market is about to experience. How anyone can treat declines in a national context is interesting but hardly analytical.

    • What is your advice to a senior who is considering downsizing and either buying an existing new inventory home of having one built? In either case the purchase will be the cash proceeds from an existing home.

      • Elio,

        I am an old time real estate broker. One thing I am very clear about is all real estate value issues are local. In some parts of the country there is a glut of “new home” inventory and prices in those sectors are down. However, seniors buying into those communities could be buying into “ghost towns” for a period of time.

        General advice on a national forum is risky at best. However, that said, seniors need to do their homework and get as much information from reliable sources as possible. Once a senior gets a home, this is not like 2005 and 2006, they could have severe problems trying to sell out of a poor decision.

        Today with the Internet there is information overload. Home buyers need to focus on quality information and must devote some time to determine what is less meaningful and more meaningful information.

        For example, we saw someone on this website yesterday being interviewed about what was needed for developers to embrace HECMs for purchase. In the last analysis, he admitted he had no experience with developers related to HECM for purchases and some with such experience had to step in and state what was actually causing this reluctance.

        While the first three rules of real estate are location, location, location, the next three are, homework, homework, and more homework.

      • Thanks for the advice. The market we are contemplating in North of Dallas and at this time new inventory homes are selling within days of completion. We are also considering not only paying cash for the home, but thinking seriously about getting a reverse mortgage that the models I have run show the monthly payout will be enough to pay the taxes, insurance, and projected utility costs. We have done extensive amounts of homework in all areas. Any additional comments would be appreciated

  • What is your advice to a senior who is considering downsizing and either buying an existing new inventory home of having one built? In either case the purchase will be the cash proceeds from an existing home.

  • Elio,rnrnI am an old time real estate broker. One thing I am very clear about is all real estate value issues are local. In some parts of the country there is a glut of “new home” inventory and prices in those sectors are down. However, seniors buying into those communities could be buying into “ghost towns” for a period of time.rnrnGeneral advice on a national forum is risky at best. However, that said, seniors need to do their homework and get as much information from reliable sources as possible. Once a senior gets a home, this is not like 2005 and 2006, they could have severe problems trying to sell out of a poor decision.rnrnToday with the Internet there is information overload. Home buyers need to focus on quality information and must devote some time to determine what is less meaningful and more meaningful information.rnrnFor example, we saw someone on this website yesterday being interviewed about what was needed for developers to embrace HECMs for purchase. In the last analysis, he admitted he had no experience with developers related to HECM for purchases and some with such experience had to step in and state what was actually causing this reluctance. rnrnWhile the first three rules of real estate are location, location, location, the next three are, homework, homework, and more homework.rn

  • Thanks for the advice. The market we are contemplating in North of Dallas and at this time new inventory homes are selling within days of completion. We are also considering not only paying cash for the home, but thinking seriously about getting a reverse mortgage that the models I have run show the monthly payout will be enough to pay the taxes, insurance, and projected utility costs. We have done extensive amounts of homework in all areas. Any additional comments would be appreciated

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