Q1 Home Values Echo Price Drop

First quarter home values fell dramatically, roughly echoing the significant prices drops in the first quarter reported by Clear Capital and others who have confirmed the long feared double dip.  Zillow reported home values posted their largest quarter-over-quarter decline since the fourth quarter of 2008, falling 3 percent. Home values have fallen 29.5 percent from their peak in June 2006.

However, the values report, created by Zillow’s automated valuation model, not actual appraisals, covered only the first quarter and did not reflect upticks in prices in April reported last week by Altos Research.

As a result of the falling values, negative equity reached a new high with 28.4 percent of all single-family homes with mortgages underwater, up from 27 percent in Q4 2010, due to accelerating home value declines.

“Home value declines are currently equal to those we experienced during the darkest days of the housing recession. With accelerating declines during the first quarter, it is unreasonable to expect home values to return to stability by the end of 2011,” said Zillow Chief Economist Dr. Stan Humphries. “We did expect substantial payback from the homebuyer tax credits, which buoyed the housing market last year, but underlying demand post-tax credit, as well as rising foreclosures and high negative equity rates, make it almost certain that we won’t see a bottom in home values until 2012 or later.”

Very few markets were exempt from home value declines in the first quarter. The vast majority (97 percent) of the 132 markets covered by Zillow logged home value declines. Only the Fort Myers, Fla., Champaign-Urbana, Ill. and Honolulu, Hawaii metropolitan statistical areas (MSAs) experienced quarterly increases, with home values rising 2.4 percent, 0.8 percent and 0.3 percent, respectively. Home values in the Sarasota, Fla. MSA remained flat.

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