Despite recent economic turmoil, home values in the United States remained almost unchanged from the second quarter to the third quarter of 2011, declining 0.2 percent, according to Zillow's third quarter Real Estate Market Reports. The Zillow Home Value Index fell 4.4 percent year-over-year to $171,500. Home values have fallen 28.8 percent since they peaked in June 2006.
A lower rate of foreclosure liquidations, coupled with relatively flat home values caused negative equity to rise in the third quarter with 28.6 percent of single-family homeowners with mortgages underwater, compared to 26.8 percent in the second quarter. While the pace of foreclosures has slowed, liquidations remained high in September, with 8.7 out of every 10,000 homes being liquidated.
Regionally, home values have weakened in the majority of the metropolitan statistical areas (MSAs) covered by Zillow, with 105 out of 157 markets declining from the second to the third quarter. Comparatively, 66 out of 157 markets declined between the first and second quarters of this year. Several markets, including Washington and Fort Myers, Fla., saw declines this quarter after two consecutive quarters in positive territory. However, there are signs of stabilization in some of the hardest hit markets in Michigan. Ann Arbor, Grand Rapids, Detroit and Lansing, have all seen at least two quarters of appreciation.
"The peak summer homebuying season is over for the year, with fewer home sales to show for it than one would expect based solely on the underlying fundamentals of price and financing costs. Home affordability is at historic lows courtesy of a large reset in home prices and continued low mortgage rates," said Zillow Chief Economist Dr. Stan Humphries. "We're clearly dealing with a crisis of confidence that is keeping potential buyers on the sidelines, fueled largely by high unemployment and more general economic uncertainty. That said, given the steady drumbeat of recent negative economic news, home values held up better than would be expected. We have been forecasting a housing bottom in 2012, at the earliest, and third quarter data further confirms this forecast."