(Bloomberg News) More than 28% of U.S. homeowners owed more than their properties were worth in the first quarter as values fell the most since 2008, Zillow Inc. said today.
Homeowners with negative equity increased from 22% a year earlier as home prices slumped 8.2% over the past 12 months, the Seattle-based company said. About 27% of homes were "underwater" in the fourth quarter, according to Zillow, which runs a website with property-value estimates and real-estate listings.
Home prices fell 3% in the first quarter and will drop as much as 9% this year as foreclosures spread and unemployment remains high, Zillow Chief Economist Stan Humphries said. Prices won't find a floor until 2012, he said.
"We get tired of telling such a grim story, but unfortunately this is the story that needs to be told," Humphries said in a telephone interview. "Demand is still quite anemic due to unemployment and the fact that home values are still falling. And that tends to make people more cautious about buying."
The U.S. unemployment rate rose to 9% in April, up from 8.8% in March, the Department of Labor reported May 6. Home prices have fallen almost 30% from their June 2006 peak, wiping out more than $10 trillion in equity, including $667.5 billion in the first quarter, Humphries said.
Dropping Home Values
Other analysts also expect homes to continue losing value this year. Oliver Chang of Morgan Stanley expects prices to fall as much as 11%, according to an April 25 report. Prices may fall "another 5 or 10%," Robert Shiller, an economics professor at Yale University, said April 26 on Fox Business News. Home prices were 33% below the July 2006 peak in February, according to the S&P/Case-Shiller Composite 20-City Home Price Index, co-created by Shiller.
Prices will continue falling as more houses are lost to foreclosure, flooding the market with distressed properties, Humphries said.
Foreclosures fell to the lowest level in three years in the first quarter as lenders worked through a backlog of flawed paperwork, according to RealtyTrac Inc., an Irvine, Calif.-based real estate information service. Foreclosure filings are likely to jump 20% this year, reaching a peak for the housing crisis, RealtyTrac predicted in January.
Las Vegas Highest
In Las Vegas, 85% of homes with mortgages were underwater, the most of any city tracked by Zillow. Other metropolitan areas in the top five were Reno, Nev., at 73%; Phoenix at 68%; and Modesto, Calif., and Tampa, Fla., both at 60%. Zillow has tracked negative equity since the first quarter of 2009, when more than 22% of homes were underwater.