Home Values Lost $1.4 Trillion during 4Q 2008

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

Americans lost more, in terms of home values, during the final quarter of 2008 than in all of 2007. According to Zillow Real Estate Markets Report, home values fell 11.6 percent or $1.4 trillion during the eighth consecutive quarter of declines.

The declines mean that U.S. homeowners lost a cumulative $3.3 trillion in home values during 2008. During all of 2007, home values lost only $1.7 trillion. Since the peak of the housing market in 2006, home values have declined by $6.1 trillion.

As home values have declined, more American homeowners have found themselves underwater on their mortgages. One out of every six homeowners had negative equity by the end of 2008, up from the one in seven in the third quarter. Further, foreclosures made up nearly one in five or 19.9 percent of all transactions in 2008.

A witch’s brew of economic insecurity, foreclosure and tightened lending standards are helping to keep hard-hit markets down and to widen the scope of markets showing declines in home values,” said Dr. Stan Humphries, Zillow vice president of data and analytics. “As more markets turn down and markets that were already down go deeper, the pace at which value is being erased from the U.S. housing stock is rapidly increasing, with more value wiped out in the fourth quarter of 2008 than was eliminated in all of 2007. The fourth quarter is the first in which we were able to see the effects of the mounting economic insecurity that picked up steam in the fall of last year. People without jobs, of fearing jobs loss, typically don’t buy homes, no matter how low prices or mortgage rates might be. Public policy, in terms of both job creation and efforts to stem the tide of foreclosures, will have a large influence on when some of these markets find bottom.”

Of the 161 metropolitan statistical areas (MSA) surveyed as part of the Zillow Real Estate Market Reports, 21 are not feeling the pinch of declining home values. Home values in the Pittsburgh MSA were flat (-0.1 percent) in 2008. Home values in the Fayetteville, NC MSA actually increased by 6.9 percent, followed closely by the 6.2 percent increase in Yakima, WA MSA. Other areas in New York State, the Midwest and the South also experienced steady or increasing home values.

Unfortunately, 10.9 percent of all real estate transactions across the country in 2008 were short sales. The Lincoln, NE MSA led the country in the rate of short sales, with 14.1 percent of all transactions. Short sales also accounted for more than 11 percent of all transactions in California’s San Jose, Santa Rosa and Santa Cruz MSAs. The Central Valley in California continued to lead the nation in foreclosures, as well. More than half of all sales in the Madera, Merced and Stockton MSAs were foreclosures compared to the 3.9 percent recorded in the New York City MSA and Grand Junction, CO MSA, which were the nation’s lowest.