Zillow has posted their latest quarterly home value reports.
Their charts for the Seattle area include a graph of the percentage of homes sold at a loss (approaching 30%) as well as a chart showing the percentage of recent buyers with negative equity (over 50% of 2007 buyers).
Interesting stuff from Zillow as usual.
You can also find additional news coverage of Zillow’s report at the Seattle Times and at Aubrey Cohen’s blog.
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Tags: home equity, negative equity, Zillow
Zillow’s latest Homeowner Confidence Survey is at least worth a brief mention. According to the third quarter update, only 65% of homeowners in the West believe that their home declined in value over the last year, while in reality 85% of homes experienced falling prices. Read Zillow’s own blog post about the report here.
Also interesting is the fact that 39% of those surveyed believed that their own home would decrease in value over the next six months, while 57% of that same survey group believed that the overall value of homes in their local market would decrease. I guess there are a lot of ultra-hyper-micro-local real estate markets out there.
The discontinuity between homeowner perception and reality was not as extreme as it was in last quarter’s report, but it still seems awfully large, especially if you believe (as many in the real estate industry do) that the media has been nothing but “doom and gloom” about the real estate market.
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Tags: home equity, Zillow
The Center for Economic and Policy Research has released another report on the prospects for building home equity over the next four years, and much like their April report, their conclusions are not good for current home buyers hoping to build short-term equity.
Despite the collapsing housing bubble and consequent fall in house prices in bubble markets, the prospects for accumulating equity still look grim for homeowners as prices are still far from reaching their historical norm. The relative merits of owning and renting will be affected by the extent to which homeowners can accumulate equity. Even with the general increase in house prices at the same rate as the overall rate of inflation, homebuyers are at risk of facing plunging home values in bubble inflated markets.
Based on calculations that compare the cost of buying a home at 75 percent of the median house price, they predict that current home buyers in the Seattle area will have between -$117,471 and -$123,373 equity by 2012.
Here’s how Seattle’s situation compares to other areas around the country, according to CEPR’s calculations.
Figure 2 shows the updated projections of equity in the 100 largest metropolitan areas after four years for a household buying a home at 75 percent of the median price. Blue circles indicate positive equity, while red circles imply negative equity. The calculations deduct 6 percent of the projected sale price for realtor fees and other selling costs.
The only metropolitan areas outside California predicted to have a larger amount of negative equity than Seattle are Honolulu Hawaii and Bridgeport Connecticut.
To calculate the projected negative equity, CEPR assumed that the (75 percent of median) house price will adjust over the next four years to a value of 15 times the annual rent (adjusted upward by 33% to adjust for the difference between apartments and houses and then again by 12.6% to account for rent increases). For full details on CEPR’s methodology, download the pdf (which has been added to the Library for future reference).
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Tags: CEPR, fundamentals, home equity, library, negative equity
As the far-reaching economic consequences of the popping of the housing/credit bubble unfold, local governments are feeling the pain. Snohomish County faces a $9 million shortfall for 2009, forcing a hiring freeze. While down in King County, Ron Sims just announced that 255 jobs will be cut.
Financially ailing King County will send layoff notices to as many as 255 employees today, on top of 150 jobs already eliminated.
…
Paring next year’s general fund to $644 million, Sims said, meant cutting $93 million from what would have been needed to maintain current levels of government service.
…
The budget is out of whack because revenues from sales tax and investments have dropped while the cost of employee benefits, cost-of-living adjustments, fuel and new labor contracts have risen.
One large factor in the drop of sales tax revenues is probably the end of the housing ATM. As documented at Calculated Risk, Mortgage Equity Withdrawal plunged to near zero in the second quarter 2008.
Seattle Times columnist Jon Talton runs through some more ways that the economic crunch is weighing on Seattle.
In recent days, the gravity of the crisis for the Puget Sound region may have been overshadowed by the gut-wrenching gyrations of the stock market — itself a marker for the lost wealth in a place heavily populated by investors. But Microsoft’s announcement of re-evaluating its hiring situation is very big. Boeing and the striking Machinists, seeing the gravity of the moment, are talking again.
Nordstrom same-store sales falling nearly 10 percent in the five weeks ending Oct. 4 is a warning for what’s to come for other retailers based here. As retirement nest eggs are vaporized, jobs lost and houses foreclosed, those vaunted consumers can no longer prop up the economy.
Nor can we count on exports. The world economy is slamming into a recession, and last week the International Monetary Fund warned of “extremely serious” consequences, including famine.
Yikes. I guess when folks were going around touting Seattle’s economy as special and stronger than elsewhere, they didn’t really consider the far-reaching effects of the bursting bubble. The bottom line seems to be that this mess runs deeper than anyone really realized.
(Keith Ervin, Seattle Times, 10.14.2008)
(Calculated Risk, 10.06.2008)
(Jon Talton, Seattle Times, 10.12.2008)
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Tags: Ervin, home equity, Jobs, King_County, Local Economy, Seattle_is_special, Seattle_Times, Snohomish, Talton, tax revenues
The Puget Sound Business Journal reported Friday on some more news from WaMu that is likely to affect local homeowners.
Washington Mutual Inc. has slashed or suspended $6 billion in available home equity credit to its customers in an effort to reduce its risk in a flailing housing market.
If they haven’t already been notified, WaMu’s customers across the country will learn of the change to their credit availability in a letter mailed to them in the next several days. The bank declined to disclose how many customers will be affected.
If a borrower’s home has depreciated — regardless of credit history — the line of credit will likely be reduced because the equity has fallen.
…
The Seattle-based thrift reported $1.1 billion in bad home equity loans and lines of credit in the first quarter, up 35 percent from the same time the previous year, according to a recent regulatory filing. The company saw a total of $9.2 billion in nonperforming assets for the quarter, or about 2.9 percent of its total assets. Nonperforming assets are a measure of bad loans.
Good. Making it super-easy to borrow from one’s home equity essentially eliminates one of the primary advantages of buying a home. A home “owner” that is simply building debt instead of building equity is actually worse off than the so-called bitter renters in my opinion.
Elsewhere on the home financing front, the P-I ran a syndicated column this weekend that contends that although rates on the new conforming-jumbo loans have dropped down close to conforming loans, they’re still pretty hard to get.
Higher loan limits, set early this year by the federal government as part of an economic stimulus package, were supposed to make jumbo loans more affordable in expensive housing markets. Rates finally have come down on these so-called jumbo conforming mortgages, though these loans likely will remain hard for most borrowers to get.
Unfortunately the article doesn’t really go into detail about why the loans are still hard to get, but I suspect it’s for all the reasons I laid out back in March.
(Journal Staff, Puget Sound Business Journal, 05.16.2008)
(Holden Lewis, Bankrate.com, 05.16.2008)
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Tags: Financing, home equity, lending, mortgages, WaMu
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