Homeowners Swimming in Mortgages

Declining home values have caught up with the Dallas metroplex.

At first, the struggling real estate market didn't seem to hit Dallas-area homeowners too hard.  But yesterday Zillow.com released its first quarter Real Estate Market Reports for 2009, and declining home values have caught up with the Dallas metroplex.

With home values down and negative equity on the rise in the DFW home market, Zillow's latest report brings some bad news for Dallas homeowners:

  • 16.8% of DFW homeowners now have negative equity - which means they owe more on their mortgage than their home is currently worth.
  • Home values fell 7% year-over-year in the first Quarter to a Zillow Home Value Index of $127,801.  That's down a total of 8.1% since the Dallas market peaked in 2007.
  • Dallas-area homes lost $10.5 billion in value during the first Quarter of 2009, and have lost $21.7 billion in the past 21 months.

Across the United States, home values fell again in the first quarter, posting a year-over-year decline of 14.2% according to the first quarter Zillow Real Estate Market Reports.  The reports encompass 161 metropolitan areas and cover the value changes in all homes, not just homes that have recently sold.

This is the ninth consecutive quarter of decline and has left eight regions - including the Modesto, CA, Stockton, CA, and Fort Myers, FL, regions - with median value declines of more than 50% since those markets peaked.  And about half of the markets in the report had a negative or flat annualized change over the past five years.

But Dr. Stan Humphries, Zillow vice president of data analytics, says there are a few early signs of improvement. 

"Slowing declines in select markets are a bright spot or, at least, what passes for one given current market conditions," said Humphries. "Unfortunately, given the magnitude of the current rates of decline, we're still many months away from a bottom even as depreciation slows."

Dr. Humphries predicts that we won't see the bottom of the housing market until 2010, and it could be a long bottom before there is meaningful recovery in home values.

One factor to the long fall is that potential sellers appear to be holding back until evidence of an improved housing market.  This means as many as 20 million homes could seep into the market, creating a steady stream of supply that far outpaces demand and keeps prices flat.

Meanwhile, American homeowners continue to sink into negative equity with 28.9% in the first quarter alone.  To put things in perspective - 17.6% of all homeowners owed more on their mortgage than their property was worth in the fourth quarter of 2008, and 14.3% were underwater in the third quarter of 2008.

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