Q4 Shows 27% Negative Equity for Homes

NewImageOnline real estate hub Zillow.com released some disheartening findings on home values and negative equity in the fourth quarter of 2010, including a figure of 27% of single-family homes that currently have mortgages.

Additionally, home values in the U.S. fell 2.6%, posting their greatest quarterly loss since the first quarter of 2009. Zillow’s Home Value Index’s year-over-year loss in the fourth quarter amounted to 5.9%, with the average home value at $175,200.

Zillow attributes the decline largely to government-sponsored home buyer tax credits wearing off in mid-2010, after delaying home value losses during the previous time period.


“While the tax credits did not hurt the housing market, they did delay its bottom by interrupting the housing correction that was taking place,” said Dr. Stan Humphries, Zillow chief economist. “

With more than a third of homes selling at a loss and negative equity at 27%, the overall national outlook is mediocre at best, according to the Zillow data.

“Home value trends in the fourth quarter remained grim, but the good news is that these declines, while painful in the short-term, mean we’re getting closer to the bottom. The housing recession is likely in its death throes, and we expect to see sales pick up in early 2011. That will lead the way to home values stabilizing and an eventual bottom later this year, although it will take several months of increased sales activity before values begin to respond,” said Humphries.

Of the largest 25 metropolitan statistical area covered by Zillow, Detroit (-17.4%), Miami (-15.4%) and Atlanta (-15.3%) experienced the greatest year-over-year declines in the Zillow home value index. Metro areas that suffered the smallest declines were Riverside, Calif. (+0.1%), Pittsburgh (-0.8%) and San Diego (-1.2%).

The area with the greatest negative equity was Phoenix, at nearly 70%, compared with the national average of 27%.

See here for the full Zillow report.

Written by Elizabeth Ecker

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  • This information once again reinforces the concept that housing risk is more local than national; in many cases it is very local. Although late to the game, the steps which HUD has taken in redesigning their models are to be commended. However, as in the past, assumptions must be readdressed, tested, and tweaked continually.

    Although the same cannot be said for Phoenix at an alarming 70%, seeing the fact that 27% of all homes are underwater is an interesting statistic which is not very meaningful. It is meaningful that in the last quarter the percentage rate has grown by over 15%; it was a little over 23% at the end of the prior quarter.

    Here being underwater is not a mortgage issue. That was the story of the Carter and early Reagan era. The biggest issue in the current era is the real unemployment and underemployment rates. While the unemployment rate for political purposes has recently been placed at 9%, some estimate the real unemployment rate at 16%. I have yet to hear what the underemployment rate is approximated to be.

    Coming back to the significant of the 27% rate, not much can be said. It would be helpful to see that stratified by the percentage that the debt exceeds values. That would tell quite a story. Also having irreversible defaults and foreclosed properties shown as one combined group would also be helpful. If the vast majority are only underwater by just 1%, then a slight blip up in average national home values should help bring much of this group back “above water.”

    Phoenix is of greatest concern. With the highest proportion of seniors than any other metropolitan area of its relative size in the West, this means many seniors have no equity in their homes. Yet on the list of HECMs endorsed and outstanding, the whole state of Arizona has less than 17,000. The bad thing is home values in Arizona do not seem to have bottomed.

  • Critic-
    I feel for the Arizona seniors. When a potential deal hits my desk and I see a Phoenix area zip code I cringe and my heart goes out to them. I so much want to help but 8 out of ten times I know it’ll be tough or next to impossible (9.95 out of 10 if it’s a HECM to HECM). Lately I have been seeing similar trends in Baltimore, but nowhere near the scope as in Arizona.

    • James,

      I wish I could tell you how wrong you are.

      A few years ago I worked with an originator in AZ who all but went over the cliff trying to convince seniors in Phoenix to get a reverse mortgage. My reaction was that he was too much. It turns out those seniors who listened to his pleas now have no monthly mortgage payments and many have unused lines of credit. Yes, they are underwater but those seniors are grateful for those seminars because it saved them from far worse financial woes.

      The situation in Arizona is truly heart wrenching. Unfortunately the real story is not the mere superficial numbers but real stories of pain and sorrow just like you portray.

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