Zillow's Prediction for 'Underwater' Homeowners

Despite the optimism generated by some of the recent real estate market data on home sales and home prices, here comes yet another forecast to dampen that enthusiasm.

Via a Bloomberg report, Zillow makes another prediction for "underwater" homeowners.

Almost one-quarter of U.S. mortgage holders owed more than their homes were worth in the second quarter and that figure may rise to as much as 30 percent by mid-2010 as job losses and foreclosures climb, Zillow.com said.

Homeowners are being hurt by price declines. The estimated median value for single-family houses slid to $186,500 in the period, a 12 percent drop from a year earlier and the 10th consecutive quarterly decrease, the Seattle-based real estate data service said in a report today.

“The negative-equity rate will rise and spin off more foreclosures,” Stan Humphries, Zillow’s chief economist, said in an interview. “I see a substantial downside risk to prices and don’t think we’ll see a bottom until the middle of next year.”

Combine this with last week's outlook from Deutsche Bank that the tally of homeowners who owe more than their house is worth would rise to almost 50 percent by 2011 and you have two very good reasons to be cautious about any near-term real estate purchases.

Comments

[Sterling Ha...:]

90 day delinquencies have continued to rise unabated, while foreclosures have lagged behind. Sooner or later these properties will have to be sold at liquidation prices

Aug 12 08:46 AM

[The Economi...:]

I would like to personally slap the faces of cnbc, cramer and everyone else who is calling this recession over.

My house won't sell.

Aug 12 09:38 AM

[basehitz:]

DB predicting underwater mortgagers near 50% by 2011. Couple this with a probable long bottoming process and slow recovery in housing. Now add the weak job outlook and we're supposed to believe over-leveraged consumers will not default in mass on these underwater mortgages?

The foreclosure trend remains ugly.
4.bp.blogspot.com/_pMs...

Anyone want to discuss CRE? How about implications for banks? It seems increasingly stock traders assume stocks higher = things are good. Good luck with that trade.

Aug 12 10:03 AM

[Houston:]

Sorry for having a more positive outlook. Unemployment is at 9.4.
I doubt it will double or go a lot higher. Most people going forward will keep their incomes. I doubt another 15% drop in housing regardless of foreclosures.

Where were all these genius prognosticators such as Deutch bank and Zillow when the real estate bubble was shooting through the sky. Mostly saying that "the economy is fundamentally sound."

Personally I don't count on these folks to do much but be wrong.

Aug 12 10:58 AM

[Mark Bern:]

My Dear Economist,

I feel your pain and am truely sorry that your house won't sell. I own just shy of 100 investment properties that won't sell either. If you get the chance to do some slapping, please let me know how as I owe those guys a few slaps of my own.

I have also seen multiple other reports that suggest that we haven't seen the peak in foreclosure yet. Some suggest that there could be additional foreclosues over the next five years in excess of 10 million. And they generally sell at firesale prices. One report projected 13 million more foreclosures. It may not really matter how many more foreclosures are coming. In the end, what really matters is that we are going to see an increase in foreclosures hitting the markets over a sustained period of time and that will take its toll on housing prices until it begins to abate.

The government can't stop this tsunami.

Aug 12 10:58 AM

[TBill:]

Your houses will sell, but maybe not at the price you'd like.

Too bad you are not in Vegas or Phoenix. House lists, bidder fall all over themselves with multiple offers. Typically go for 10% over list, sometimes much more. They are down to a 3 month supply.

It's all a matter of discovering price.

Aug 12 11:21 AM

[Mad Hedge F...:]

sdfgbn Deutsche Bank has put out a report on residential real estate that will raise the hair on the back of your neck, if you still own your own home. Prices have not hit bottom and have another 14% to fall by 2011, putting in a 42% fall from top to bottom. By then, almost half of all mortgage holders in the US will be underwater. The list of the top underwater cities in the US is not good news for the Land of Fruits and Nuts, where lending was the most aggressive, imaginative, and oops, illegal:

Merced, CA 85%
El Centro, CA 85%
Modesto, CA 84%
Las Vegas, CA 81%
Stockton, CA 81%

The murder weapons in these nearly home equity free cities break out as the following:

Option ARMS 89%
Subprime 69%
Alt-A 66%
Jumbo 46%
Conforming 41%

These forecasts tell us that a second stimulus package is a sure thing, that unemployment will soar over 10%, and that a “W” shaped recession is a lock. Gee, do you thing the stock market might go down on this?

Aug 12 11:41 AM

[Troyhector:]

According to new research from the University of Chicago's Booth School of Business and Northwestern University's Kellogg School of Management.

"26% of the record numbers of home mortgage defaults across the country are "strategic" -- that is, calculated economic decisions to bail out of loans by owners who actually have the money to make the payments but can't handle the negative equity they're carrying caused by local property value declines."

Nationwide, according to data from Zillow.com, 22% of all homeowners were underwater, with mortgage debts that exceeded their home values, in the first quarter of 2009.

In some parts of California and Nevada, more than half of all households have negative equity.
"In a few localities, the size of the equity deficit is staggering: In the Salinas, Calif., metropolitan area, for example, the median equity for people who bought their homes in 2006, near the peak of the boom, is now a negative $214,305, according to the study."

Read More: www.housingnewslive.com

Aug 12 04:00 PM

[Kunst:]

Your house will sell. Just not at the price you want.

Aug 13 01:41 AM