The percentage of underwater homeowners continued to rise in the
third quarter of the year, with nearly one-quarter of mortgage
holders owing more than their property is worth.
An estimated 23.2 percent of single-family homeowners with
mortgages owed more than their property was worth in the third
quarter of the year, up from 22.5 percent in the second quarter,
according to figures released this week by real estate data firm
In some housing markets, as many as four mortgage holders in
five were underwater, with 80.2 percent of Las Vegas homeowners in
negative equity, followed by Phoenix at 68.4 percent. Eleven of the
145 metropolitan markets tracked by Zillow had negative equity
rates in excess of 50 percent.
"The high percentage of homeowners in negative equity continues
to be troubling, in that it represents a huge number of people who
are not only more vulnerable to foreclosure, but who are
essentially trapped in their current homes and are prevented from
selling and buying a new home," said Dr. Stan Humphries, Zillow
chief economist. "This has profound implications for future demand
and will be a millstone around the neck of the housing market."
Price declines rival Great Depression
Zillow attributes the rise in negative equity to a continuing
decline in housing values, which according to its figures have
fallen 25 percent nationally since the market peak in July 2006.
That's coming close to the five-year decline of 25.9 percent at the
start of the Great Depression during 1929-33, according to
U.S. home values were down 1.2 percent from the second quarter,
to a median $179,900, and showed an annual decline of 4.3 percent
from the third quarter of 2009. It was the 17
consecutive quarterly decline reported in the Zillow Home Value
"While not unexpected, the unceasing declines in home values
signal that we're in for a long, bleak winter of continued troubles
for the housing market," Humphries said. "The length and depth of
the current housing recession is rivaling the Great Depression's
real estate downturn, and, with encouraging signs fading, will
easily eclipse it in the coming months."
California markets change direction
Home values declined in over three-quarters of the housing
markets surveyed, with the California markets of Los Angeles, San
Diego, San Francisco, San Jose, and Ventura showing declines after
five quarters of consecutive increases.
Other home value surveys have reported different results over
the past year. The widely respected Standard & Poors/
Case-Shiller home price index of 20 major U.S. real estate markets
recently reported a 1.7 percent increase in housing values over the
past year, based on August data. Its most recent data did reflect a
downturn in the previously rising California markets, however.
The National Association of Realtors has reported
increases in median sales prices of single-family homes in the
second and third quarters of 2010, although a 0.2 percent annual
decline from the third quarter of 2009.