Zillow released our quarterly trends report this week, and a lot of was good news/bad news (I guess that's better than bad news/bad news). What I mean by this is, that there are some positive trends, but behind each of these is a potentially lurking down side.
What makes it so hard to analyze the trends 'as is' this quarter is that you can't just extrapolate them forward since the data for June is so affected by the federal homebuyer tax credit swhich applied to home purchases under contract by the end of April. We've already seen home sales slacken significantly with the end of the tax credits, as existing homes sales in May and June were down 2.2% and 5.1% respectively, on a monthly basis. Predictably, pending sales have fallen even more, down 30% and 2.6% on a monthly basis in May and June respectively. In a blog post, Stan Humphries who compiles all of Zillow's data asks, "Will fewer sales slow the deceleration of monthly depreciation in home values or reverse it altogether, causing home values to fall even faster?"
An example of a good new/bad news situation has to do with what we are seeing in California. The good news- 20 of the 26 California markets tracked by Zillow have seen increased home values since last quarter and 10 have seen home value appreciation above 5%. Los Angeles home values have risen 5% since last year and San Diegohas seen 7% appreciation in home values. The potential bad news- how much of these increases are a result of the dual stimulus in California (where residents have had access to both the federal home buyer tax credits and an additional state home buyer tax credit)? So as the stimuli expire, will these trends hold steady, continue to trend up, or subside because of the artificial demand pushed forward?
Another good news/bad news situation has to do with negative equity. Let's start with the good news, it's down in the second quarter to 21.5%, from 23.2% in the first quarter. The bad news is why it's down. It seems that decline in negative equity is coming from a tremendously high foreclosure volume which is cleaning out homes in negative equity. So the rate comes down but only at the expense of lots of homeowners losing their homes.
ZHVI = Zillow Home Value Index
I encourage you to jump over to the Zillow Blog to read the whole Q2 2010 report, as there is a lot more information there, along with more local color. And as usual, all local data can be downloaded from our Real Estate Market Report page.