Property prices in the US continued to fall in the first three months of 2010 although California is emerging to lead a possible recovery, figures suggest.
Several large metros in California show evidence of reaching bottom but growing negative equity and record foreclosures will delay a nationwide recovery, according to the Zillow Real Estate Market Report for the first quarter of 2010.
It shows that home values in most US markets continued to decline and its Home Value Index fell 3.8% year on year and 1% quarter over quarter, to $183,700. Property market conditions varied across the country but home values in 106 of the 135 tracked by Zillow fell.
Negative equity across the country remains high, with 23.3% of single family homes with mortgages underwater, up from 21.4% in the fourth quarter of 2009. Foreclosures reached a new peak in March, with more than one out of every 1,000 of US homes going into foreclosure during the month.
In California the markets in Los Angeles, San Diego, San Francisco, Santa Barbara and Ventura have stabilized significantly in the past year, marking what may be a bottom, the report says. Home values in those markets have risen significantly for at least the past 10 months, after values in all five markets reached a low point in April or May 2009.
Although home values could fall again, it is more likely, given current conditions, that they will remain above their lowest level reached last year than fall below, the report adds.
‘It’s a very positive sign that several large markets have hit what appears to be a tentative bottom in home values. 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,’ said Zillow chief economist Stan Humphries.
‘However, we continue to have concerns about other factors playing out in markets across the country. We suspect that the homebuyer tax credits are, for the most part, stealing demand from later this summer, rather than creating new demand. Even with the tax credits in place during the first quarter, inventory levels were rising, and home values continued to decline at a steady clip, rather than steadying,’ he explained.
‘Because of these factors, 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,’ he added.
Foreclosure re-sales across the country remained high in March, making up more than a fifth, some 22.2%, of all US home sales. Foreclosure re-sales also made up the majority of sales in several MSAs, including the Mercedes, California, at 66.3%, Madera, California, at 63% and in Modesto, California, at 61.7%. A third, some 32.4%, of home sales nationwide sold for less than what the seller originally paid.