Thursday, 7 May 2009

Negative Equity Continue to Grow - Q1 2009 Real Estate Index

Zillow.coom has introduced Q1 2009 Real Estate Index.

There are lots of data that show real estate price change such as Case-Shiller Index, Realtor Median Price data, FHFA housing index, etc... I really like this data as it give you 1) neighborhood/zip code based real estate data (location, location, location!!) and 2) negative equity data.

Here is the short-summary of Q1 2009:

- Zillow Home Value Index: $182,378(-14.2% Vs. Q1 2008)
- Total Real Estate Value Lost During Q1 2009:  $704 billion
- Percent of US Home Onwer in Negative Equity: 21.9%

Recently, media begin to quote optimistic news such as "worst period is about to be over" and "housing market shows some improvement." However, negative equity is the leading source of foreclosure and distressed sales, I firmly believe there will be continuous supply of distressed sales.

Zillow has also introduced MSA with the highest percentage of negative equity houses. You can imagine that, especially in these MSA, massive supply of foreclosed homes will depress the markets!

1. Las Vegas NV: 67%
2. Stockton CA: 51%
3. Modesto CA: 51%
4. Reno NV: 49%
5. Vallejo-Fairfield CA: 47%
6. Merced CA: 44%
7. Port St. Lucie FL: 44%
8. Riverside CA: 43%
9. Phoenix AZ: 42%
10. Orlando FL: 42%

To summarize, it is true that worst depreciating period is about to over. However decline of property value will lead to walking away, foreclosure and eventually distressed sales. You will have more time to evaluate when you should start bargain hunting, especially above mentioned MSA.

Happy Investing!!!

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