Nationally, on a year-over-year basis, Zillow reports that home values were down 4.4 percent with the Zillow Home Value Index at $171,500. Overall, this quarter could have looked a lot worse considering all of the economic headwinds and turbulence that materialized over the summer. In terms of strict fundamentals, housing affordability looks compelling with big resets in home value levels and historically low mortgage rates. At this point, however, it’s clearly an issue of confidence, and high unemployment and economic uncertainty are not helping on this front. While we still have a ways to go in terms of home value depreciation, the pace at which home values are falling has declined considerably during the course of this year. Nationally, foreclosure re-sales made up 18.9 percent of all sales in September, up slightly from the Q2 level of 18.8 percent. Foreclosure re-sales have, however, significantly increased from their Q3 2010 levels of 15.1 percent. This foreclosure pipeline will continue to depress home prices moving forward...the large shadow inventory will keep pressure on pushing home prices lower. That is why year over year home prices are still falling:
Negative Equity
National negative equity edged up slightly to 28.6 percent , (the local negative equity figure is close to 50% when you count all of the homes that are within 5% of being in a negative equity position) of all single-family homes with mortgages, compared to 26.8 percent in the second quarter. Negative equity fell in the second quarter on the basis of sharp improvements in depreciation rates and flat foreclosure rates. This quarter, however, home values remained relatively flat while foreclosure rates slowed further, and these two factors combined to increase negative equity. (Because Zillow and other firms that calculate negative equity use valuations, each which has some margin of error, and because the number of homeowners just barely in positive equity is somewhat greater than the number who are just barely in negative equity, the estimation error will tend to incorrectly place more people in negative equity (who are, in fact, in positive equity) than is offset by incorrectly placing people in positive equity (when, in fact, they are in negative equity). This subtle point has the possibility of producing an upward bias in the negative equity statistic.)
People selling their homes in Palm Beach County lost money nearly 46 percent of the time during the third quarter of this year, according to Zillow. The percentage of Palm Beach County properties that sold for a loss between July and the end of September, was a 3.4 percent increase from the previous quarter and at an elevated rate predicted to continue through at least next year.
Any homeowner who is in negative equity and who experiences a financial setback, like a job loss, income reduction or divorce, will find their options limited. To sell a home while underwater means the seller must pony up the difference between the mortgage and the current value, or negotiate a short sale with their bank. Therefore, negative equity does open homeowners up to risk they would not otherwise encounter, and it’s important to understand the total universe of homeowners who have this increased risk.
If you happen to fall in to the 50% at or near being upside down and you need to sell or just want to know what your options may be, visit our blog http://www.shortsales123.com/, read some of the posts, then give me a call at 561-602-1258.
Thanks for reading,
Steve Jackson
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