by Broderick Perkins
(05/14/2010) Nearly one-in-four homeowners were underwater on their mortgage, foreclosures reached a new peak and home values in most U.S. market continued to slide, all in the first quarter this year.
But, says Zillow, the end is near.
Despite continued tight market conditions, housing should stop bleeding in the third quarter this year according to Zillow, a real estate information provider and home listings portal.
Healing is another matter, reports Zillow, in its first quarter Real Estate Market Reports covering 135 metropolitan markets.
"We believe national home values are more likely to reach bottom in the third quarter of 2010, rather than in the second quarter, as we had hoped. When we do get there, we expect the high rates of negative equity and foreclosures to keep national home value appreciation near zero for some time, possibly as long as five years," said Zillow Chief Economist Dr. Stan Humphries.
Zillow may be a bit conservative. Some sources predict a much longer recovery.
Humphries is, however, bullish on a third quarter landing for the housing market because home values in several large California markets have stabilized significantly, and they show tentative signs of reaching market bottom.
"As goes California, so goes the nation," is a long recited phrase of both hope and doom, depending upon which way the market is moving, given the sheer size of California's housing market and the state market's past impact on nearby states.
Zillow reported home values in the Los Angeles, San Diego, San Francisco, Santa Barbara and Ventura MSAs — have stabilized significantly in the past year, marking what may be a bottom. The areas have enjoyed slowly rising home values in the past 10 months, following property value low points in April or May 2009.
"While this is no guarantee that home values there will not fall again, it is more likely than not that they will remain above their lowest point last year, Humphries said.
Zillow's report also found:
U.S. home values fell 3.8 percent year-over-year, and declined 1 percent quarter-over-quarter, marking the 13th consecutive quarter of year-over-year declines. Home values declined year-over-year in 106 of the 135 metropolitan statistical areas (MSAs) tracked by Zillow.
Negative equity remains high with 23.3 percent of all single family homes with underwater mortgages up from 21.4 percent in fourth quarter. A mortgage is "underwater" when the home owner owes more than the property is worth.
Foreclosures reached a new peak in March, with more than one out of every thousand homes (0.11 percent) facing foreclosure.
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