May 09 2011

Buy, Buy, Buy, Buy, Buy!

08-12-09

Tue 16 Dec 08

Negative Homeowner Equity at New High

By Theresa McCabe, The Street

05/09/11 – 12:09 PM EDT

NEW YORK (TheStreet) — Home prices in the United States dropped 3% in the first quarter of 2011, the largest decrease since 2008 when the housing market experienced its worst performance, and negative homeowner equity hit a new high, according to Zillow’s Real Estate Market Report.

Median home values fell 8.2% year over year to $169,600 and are expected to fall as much as 9% this year as foreclosures spread and unemployment remains high, Zillow Chief Economist Stan Humphries said. The U.S. unemployment rate rose to 9% in April, up from 8.8% in March, the Department of Labor reported earlier this month.

“With accelerating declines during the first quarter, it is unreasonable to expect home values to return to stability by the end of 2011,” Humphries said.

Home prices were down 29.5% from their peak in June 2006. Humphries predicts that prices won’t find a floor until 2012.

Negative equity reached a new high in the first quarter, with 28.4% of U.S. homeowners with mortgages underwater, meaning they owed more than their properties were worth. This was up from 27% in the fourth quarter of 2010.

I’ll point out that The Street is Jim Cramer’s own web site.

rustymancuso581

2 comments

  2. Housing Prices Keep Falling Unabated

    What you see is that the homebuyer’s tax credit propped up the market slightly (although not enough to increase prices; prices have fallen for 57 straight months), and the removal of that tax credit has moved prices on their normal trajectory. And this is largely due to the glut of foreclosed properties in the system.

    snip

    This supply of foreclosed properties will continue to rise. Housing site Zillow estimates that 28% of all homeowners are underwater, owing more on their properties than they are worth. This represents a 22% increase from a year ago. It’s a vicious cycle: foreclosure sales lead to lower home prices and values, which lead to more underwater homes, which lead to more foreclosures. Add 9% unemployment to that and it’s hard to see a recovery in housing. And since prices remain above their historical level in real dollars, it’s not advisable to prop up the market any further.

    Perhaps the scariest part of this are the truly distressed areas. 85% of all mortgages in Las Vegas are underwater; 73% in Reno; 68% in Phoenix; 60% in Tampa.

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