U.S. home values are poised to drop by more than $1.7 trillion U.S. this year amid rising foreclosures and the expiration of homebuyer tax credits, said Zillow Inc., a closely held provider of home price data.
This year’s estimated decline, more than the $1.05-trillion U.S. drop in 2009, brings the loss since the June 2006 home-price peak to $9 trillion U.S., the Seattle-based company said today in a statement.
The drop in home values pushed more buyers underwater, meaning they owe more on their mortgages than their homes are worth, Zillow said. The percentage of homeowners with so-called negative equity reached 23.2% in the third quarter, up from 21.8% at the end of 2009.
Housing demand has slumped since the start of the year as the government tax credit expired and unemployment hovers near 10%. Sales of existing homes in October fell to an annual pace of 4.43 million, compared with 5.98 million a year earlier and an annual average of 5.81 million over the past decade, the National Association of Realtors said Nov. 23. The median price was $170,500 U.S., down from $172,000 U.S. a year earlier.
More than $1 trillion U.S. of this year’s decline in home values occurred in the second half, Zillow said. Federal tax credits of as much as $8,000 U.S. for qualified first-time homebuyers and $6,500 U.S> for repeat buyers required a sales contract by April 30.
Only 31 metropolitan areas, or fewer than one-fourth of the 129 tracked by Zillow, had gains in home values this year. They include Boston and San Diego.
Zillow’s report is similar to other forecasts for prolonged weakness in the U.S. housing market. U.S. home prices will decline as much as 11% by 2012 as weak demand and rising inventory extend the housing slump, Morgan Stanley said in a report yesterday.
Prices will be as much as 36% below their 2006 peak before finding a bottom, Morgan Stanley analysts led by Oliver Chang wrote. Sales will stay "depressed" through next year amid tightened lending standards, they said.
As many as eight million homes are in default or foreclosure and may be offered for sale, known as shadow inventory, according to Morgan Stanley. The looming supply will combine with tight credit and questions about housing-finance regulation to reduce prices 6-11% from current levels, the analysts said.
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