Home Equity

Dip in Home Values, Robo-Signing Push More Borrowers Underwater

Posted on Monday, February 14, 2011

Home values in the United States fell 2.6 percent during the last three months of 2010, posting their largest quarterly decline since the first quarter of 2009, according to a fourth-quarter market report issued by Zillow this week.
Zillow’s national home value index declined 5.9 percent year-over-year in the fourth quarter to $175,200. The Seattle-based company says U.S. home values have fallen 27 percent since they peaked in June 2006.
Accelerating home value declines, as well as a slowdown in the nation’s foreclosure rate following the late-2010 robo-signing controversy, contributed to an increase in negative equity, Zillow also reported.
The company’s analysis shows that as of the end of the fourth quarter, 27 percent of single-family homeowners with mortgages owed more on the loan than their home was worth, up from 23.2 percent in the third quarter.
Zillow attributed the abrupt increase in underwater borrowers in part to delays in the processing of foreclosures. According to the company’s latest market study, less than one in every 1,000 U.S. homes – or 0.09
percent – were liquidated through foreclosure during the month of December, down from 0.12 percent in October, when foreclosure liquidations peaked.
Foreclosures are expected to increase again in early 2011 as servicers resume action on cases that have been under review, which Zillow says may cause negative equity to fall as some underwater homeowners lose their homes to foreclosure and are no longer counted in the negative equity population.
With the end of the homebuyer tax credits in mid-2010, home value declines accelerated toward the end of the year. When they were in effect, the credits tempered home value depreciation.
Zillow notes that nationally home values fell only 0.9 percent from the first to the second quarter of 2010, but property values resumed their decline after the credits’ expiration, falling 2.6 percent from the third to the fourth quarter.
“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’s chief economist. “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.”
Humphries says he expects to see home sales pick up in early 2011, which will help to stabilize home values later down the road. He stressed that it will take several months of increased sales activity before values begin to respond. Humphries is looking for an eventual bottom to be reached in the latter part of the year.
The general consensus among economists and market analysts is that home prices will fall by at least another 5 percent this
By: Carrie Bay, DS NEWS


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