Home values continued decline in fourth quarter

Home values continued to decline in the fourth quarter of 2007, falling 3.5 percent from the third quarter and 3 percent year-over-year to a U.S. Zindex home value indicator of $224,890, according to Zillow's Q4 2007 Home Value Report. The Zindex is the median Zestimate valuation and measures the value of all homes in an area, not just those that have sold during the quarter. In 2007, condominiums posted the largest year-over-year drop, down 7.4 percent to a Zindex of $229,017 while single family residences fell 5.5 percent to a Zindex of $230,908. On a quarter-over-quarter basis, the decline in value of single family residences outpaced the decline of condominiums, falling 4.4 percent and 4 percent respectively.

In the Cape Coral-Fort Myers MSA, home values have depreciated 20.1 percent over the past year, and 7.1 percent from the third quarter of 2007. Single family homes have depreciated at 19.3 percent, while condos have depreciated even more at 24.7 percent. Homeowners in Cape Coral-Fort Myers who have purchased their homes within that past year made a median down payment of 10 percent, however now own nothing due to the declining home prices. In negative equity, 50.5 percent of home owners who purchased in 2007 are under the water, while 75.8 percent who purchased in 2006 are.

The continued decline in home values means many U.S. homeowners saw equity slip away while more homeowners were pushed into negative equity situations, meaning they owe more on their mortgage than the home is currently worth. Of those who bought in 2006, 39 percent now have negative home equity as do 30 percent of those who purchased in 2007. By comparison, only 3 percent of those who purchased five years ago, in 2003, and less than one percent of all homes in the U.S., regardless of when they were purchased, have negative equity.

The rates of negative equity are typically higher in markets that have had significant value declines and relatively low median down payments such as parts of California, Florida, Nevada and Arizona, where the median down payments were zero to 5 percent during the last two years.