By Mark Huffman
ConsumerAffairs.com
November 10, 2009
Though foreclosures show no sign of abating, there's some evidence that fewer homeowners are finding themselves "under water," owing more on their mortgages than their homes are worth.
In its third quarter report, real estate valuation firm Zillow.com says the percentage of American single-family homes with mortgages in negative equity fell to 21 percent in the third quarter, down from 23 percent in the second. The firm says home values stabilized in the short term and many underwater homeowners have already lost their homes to foreclosure.
Still, the news is far from good. Year-over-year home values in the U.S. declined for the 11th consecutive quarter, falling 6.9 percent to a Zillow Home Value Index of $190,400. However, the rate of year-over-year decline shrank for the third quarter in a row, meaning home values did not decline as dramatically year-over-year in the third quarter as they did in the second or the first.
In addition, the Zillow Home Value Index remained relatively flat in the short term, declining 0.4 percent from the end of the second quarter to the end of the third quarter.
The Zillow Home Value Index measures the value of all homes in an area, and the Q3 Zillow Real Estate Market Reports encompass 156 metropolitan statistical areas (MSAs).
Foreclosure re-sales remained high, making up more than one-fifth of all U.S. home sales in September, and made up the majority of sales in several MSAs including the Merced, Calif. MSA (74.2 percent), the Stockton, Calif. MSA (69.3 percent), the Madera, Calif. MSA (68.7 percent), the El Centro, Calif. MSA (68.1 percent) and the Las Vegas MSA (67.5 percent).
Additionally, 26.9 percent of home sales nationwide sold for less than what the seller originally paid.
"The decline in the percentage of homeowners with negative equity is a positive sign, and is directly attributable to the stabilization of home values from the second quarter to the third," said Zillow Chief Economist Stan Humphries. "It is also attributable to many homeowners who were previously underwater on their mortgage losing their homes to foreclosure."
Humphries says the next several months will be critical to the housing market. He says the expansion of the first-time homebuyer tax credit could produce an increase in demand that could partially offset the increased supply of foreclosed homes on the market.
"The credits are likely to bring continued stabilization in prices over this period, versus the price declines that we almost certainly would see otherwise," he said. "Whether this stabilization will be sustainable after the tax credits expire, however, is yet to be seen."
