U.S. home prices are expected to lose $1.7 trillion in value this year, according to a new report by Zillow.com, a research firm that tracks home prices. That decline would be 63 percent more than the $1 trillion lost in 2009, bringing the total value lost since the market peaked in 2006 to $9 trillion. Zillow estimates the total value of homes in the U.S. at $22.7 trillion as of this month.
As staggering as the losses are, the Seattle-based firm notes that not all real estate markets have declined. Boston and San Diego are among 31 of 129 markets where homes actually gained in value: Boston grew by $10.8 billion, while San Diego grew by $10.2 billion. Most gains came in the first half of the year, before the homebuyer tax credit expired.
Though “government interventions like the homebuyer tax credit helped buoy the market during the second half of 2009 and the first half of 2010, we saw a renewed downturn in the last half of this year,” said Stan Humphries, Zillow’s chief economist, in a statement.
Other experts, though, take issue with yesterday's Zillow report. Walter Molony, spokesman for the National Association of Realtors (NAR), said Zillow’s analysis contradicts many of the established home price indices. “We’ve seen a stabilization in prices,” said Molony. “Our projection for median home prices this year is flat.”
“Most of the other values talk about sales prices — they [Zillow] talk about intrinsic values,” said Rick Sharga, senior vice president of RealtyTrac, an online foreclosure tracking website. As interesting as the report is, added Sharga, “Their projected loss is significantly larger than the actual loss of home-sellers this year.”
A Look at the Larger Trends
A separate monthly report released Wednesday by Zillow shows that home values continued to tumble in October, falling 0.6 percent from September and 5 percent from one year ago. October marked 52 consecutive months of decline.
Declining home values frequently lead to an increase in the number of homeowners with underwater mortgages, or mortgages that are worth more than the homes they are attached to. Of the estimated 15 million homeowners holding such mortgages, about 7.8 million owed at least 25 percent more than the value of their properties in the first quarter of this year, according to data from Moody’s Analytics.
“Thanks to high rates of foreclosure and negative equity, it does not appear that the first half of 2011 will bring much relief,” Humphries of Zillow said. “The hope is that the market will reach a bottom next year, and that average rates of appreciation will return sometime in the next three to five years.”
Yesterday’s Zillow report came a week after the National Association of Realtors reported unexpectedly positive signs in pending home sales. On a scale of 100, the Pending Home Sales Index jumped to 89.3 in October, an increase of more than 10 percent from September.
Related Links:
Another Kick in the Gut for US Home Values, Bleeding Another $1.7 Trillion (Forbes)
Home Values Drop $1.7 Trillion This Year (Bloomberg)
American Homes are Worth $1.7 Trillion Less (CNN Money)
