Home values had their smallest decline in more than four years – just 0.4 percent – during the second quarter, according to Zillow.com, a real estate listing and online information service, on Tuesday afternoon. The report offered a glimmer of hope to a housing market that has been on life support.
In the second quarter, 26.8 percent of single-family homes had negative equity, or owed more on their mortgage than it was worth, down from 28.4 percent in the firsts three months of this year, according to the report.
Nationally, home prices fell 6.2 percent from a year earlier, but recent trends are more positive and the rate of depreciation is slowing, said experts at Zillow. The average home price hit $171,600, but is still nearly 30 percent below the peak of June of 2006.
Home values fell on a year-over-year basis in 142 of the 154 metropolitan statistical areas covered by Zillow, while eight were flat. Nearly two-thirds experienced home value appreciation.
“There are many positive signs in the second quarter, and it is clear the post-tax credit freefall of home values is over. We're not out of the woods yet,” said Zillow’s chief economist Stan Humphries. “It is very encouraging that two-thirds of markets in our report experienced home value appreciation, but we have to remember that this is coming on the heels of one of the worst quarters since the housing recession began.”
At the same time, the rate of foreclosures declined from its peak in March 2011, when 21.4 percent of all sales were foreclosure re-sales. In June, 19.7 percent of sales involved foreclosures. Humphries said there will be a bumpy road ahead for the housing market and expects a “true bottom” for home prices in 2012 at the earliest.
Two of the biggest declines were seen in Sacramento, California, with 2.7 percent, and Phoenix, Arizona, with 2.4 percent. These areas have a large inventory of foreclosed properties and high levels of “underwater” homeowners. Twenty-five cities including Washington, D.C., and Pittsburg, Pennsylvania, saw the median home value appreciate for two consecutive quarters. Washington, D.C., increased by 1.7 percent from the last quarter and Pittsburg experienced a 2.8 percent home value appreciation. Pittsburg was the only city to see a gain from the same time a year earlier, with 2.7 percent.
Home prices fell sharply earlier this year due to the large share of foreclosures that sold, but has now begun to stabilize. Foreclosures typically sell at a lower price and add downward pressure on other homes, ultimately forcing prices lower.
In a separate report on Monday, analysts at Morgan Stanley said that one way to address the backlog of distressed homes – as fast as possible and without further detriment to home prices — is to promote bulk investor ownership of foreclosures to help diminish the size of excess properties and provide affordable housing. Housing demand remains weak and will be offset by excess property supply on the market. Morgan Stanley estimates there are still some 2.2 million vacant homes available for sale, while 7.5 million homes face foreclosure, which means home prices are expected to fall further in some areas.
