Home Values Continue to Decline

The national housing market continued its decline in the third quarter with home values falling for the 17th consecutive quarter, according to Zillow Real Estate Market Reports. With home values 25% below their June 2006 peak, the current housing downturn is approaching Depression-era declines, when home values fell 25.9% in five years.

The Zillow Home Value Index declined 4.3% year-over-year in the third quarter and 1.2% from the second quarter to $179,900.

Home values fell from the second to the third quarter in 77% of markets covered in Zillow’s report. In five of those markets—the California MSAs of Los Angeles, San Diego, San Francisco, San Jose and Ventura—home values began to fall again after five consecutive quarters of increases. Other markets that showed signs of stabilization in previous quarters also faltered, with home values flattening or becoming negative in large MSAs like Boston and Denver.

“While not unexpected, the unceasing declines in home values signal that we’re in for a long, bleak winter of continued troubles for the housing market,” said Zillow Chief Economist Dr. Stan Humphries. “The length and depth of the current housing recession is rivaling the Great Depression’s real estate downturn, and, with encouraging signs fading, will easily eclipse it in the coming months.

“The high percentage of homeowners in negative equity continues to be troubling, in that it represents a huge number of people who are not only more vulnerable to foreclosure, but who are essentially trapped in their current homes and are prevented from selling and buying a new home. This has profound implications for future demand and will be a millstone around the neck of the housing market.”

Additionally, more than one-quarter (27.3%) of homes sold in September were sold for a loss, marking a near-peak level. Homes sold for a loss peaked in February 2010, with 27.7%.

Bad news for homesellers is good news for buyers who are looking for a home in our Big Canoe mountains of North Georgia.