Central Valley leads nation’s housing price collapse

SEATTLE, WASH.
August 12, 2008 9:55am

The Central Valley inland seaport city of Stockton is adrift in an ocean of red ink when it comes to home sales, according to a report from Zillow.com, a Seattle, Wash.-based online real estate information company.

While U.S. home values dropped nearly 10 percent in the second quarter compared to the same period a year earlier, home values in Stockton plunged 38.2 percent.

Zillow says 63.4 percent of the homes that sold in Stockton in the second quarter sold at a loss.

Of Stockton’s second quarter home sales, 57.7 percent were foreclosures.

Even worse is the Central Valley city of Merced, where prices have deflated by 40 percent, Zillow says.

U.S. home values in the second quarter posted the largest year-over-year decline in the past 12 years, dropping 9.9 percent from the year-ago quarter and 1.7 percent from the first quarter, Zillow says.

The nation’s median home price in the second quarter was $206,919, the company says. The median U.S. home value has not been this low since the fourth quarter of 2004, leaving nearly one-third (29.1 percent) of homeowners who purchased since 2003 with negative equity.

Out of 165 metropolitan statistical areas included in its report, Zillow says 140 lost value since the second quarter of 2007 and those in some of the hardest hit markets have seen more than one-third of their home's value lost in the past year.

Stockton’s median home value was put at $216,100, down 38.2 percent in a year and down 47.6 percent from the market’s peak, Zillow says.

Values in Las Vegas, Los Angeles and Miami areas have fallen 27.4 percent, 21.4 percent and 20.8 percent respectively, it says.

Homeowners who have experienced the most significant value declines are at most risk of being underwater on their mortgages -- meaning they owe more than their home is currently worth. Nationwide, for those who purchased their home since the beginning of 2003, nearly one in three (29.1 percent) now have negative equity.

The highest rates of negative equity are among those who purchased in 2006, when most markets peaked, as nearly half (45 percent) of those buyers across the U.S. now face negative equity after placing a median down payment of 10 percent.

The rate is nearly double for those in the Stockton MSA where nearly every homeowner (95 percent) who bought in 2006 -- with a median down payment of zero -- is underwater, says Zillow.

Nationwide, nearly one in four (23.7 percent) homes sold during the past year sold for a loss while nearly 15 percent of sales were foreclosures. In parts of California, more than 60 percent of homes sold in the past year were for a loss while homes sold in foreclosure exceeded 50 percent. In New York-Northern New Jersey-Long Island MSA, which has the lowest rates of foreclosure among the markets monitored by Zillow, the percentage of homes sold for a loss since the second quarter 2007 is 8.8 percent and the percent of homes that sold in foreclosure is 3 percent.

"The second quarter is the sixth consecutive quarter of home value declines and we see little promise of turnaround in the short-term as the rates of decline have yet to slow and, in fact, actually accelerated in many markets," says Stan Humphries, Zillow's vice president of data and analytics. "The high rates of negative equity are having a direct effect on home sales figures as we've seen considerable growth in foreclosure transactions and homes selling for a loss. Unfortunately, while there are a few bright spots -- like Pittsburgh, Oklahoma City and Austin that reached record-high values -- most markets are likely to remain in negative territory for the next few quarters given the magnitude of current year-over-year declines."

Zillow’s median home values are the median valuation for a given geographic area on a given day and includes the value of all single-family residences, condominiums and cooperatives, regardless of whether they sold within a given period. The home value index at the national and MSA levels is calculated using a weighted average of the median home value for each county.

The data is aggregated from public sources by a number of data providers for 165 Metropolitan Statistical Areas dating back to 1996. Mortgage and home loan data is typically recorded in each county and publicly available through a county recorder's office.

While many foreclosure transactions are included in the number of homes sold for loss not all are included, as there are foreclosed homes that sell for more than the foreclosed owner originally paid.