Analysts predict more foreclosures and loan defaults after a record year of home equity losses in 2008. This could in turn depress housing prices further as the market is saturated by distressed properties. For more information, read the following article from Property Wire.
U.S. homeowners lost a cumulative $3.3 trillion in property equity during 2008, with $1.4 trillion of that loss coming in the fourth quarter of last year alone, according to the latest published figures.
And since the peak of property prices in 2006 the value of losses has been $6.1 trillion, the figures from real estate information web site Zillow.com show.
Analysts, not unsurprisingly, are predicting further price falls and more defaults and foreclosures. At the end of last year, Zillow estimates that one in six, 17.6 percent, of all homeowners had negative equity, up from 14.3 percent at the end of quarter three in 2008.
Borrowers without equity in their homes are a high risk for future defaults. "A witch’s brew of economic insecurity, foreclosures and tightened lending standards are helping to keep hard-hit markets down and to widen the scope of markets showing declines in home values," said Dr Stan Humphries, Zillow vice president of data and analytics.
"As more markets turn down and markets that were already down go deeper, the pace at which value is being erased from the U.S. housing stock is rapidly increasing, with more value wiped out in the fourth quarter of 2008 than was eliminated in all of 2007," he added.
"The fourth quarter is the first in which we were able to see the effects of the mounting economic insecurity that picked up steam in the fall of last year. Negative equity will trigger new foreclosures, and that will add to inventory and depress prices," he concluded.
Foreclosures made up nearly one in five, 19.9 percent, of all transactions in 2008, Zillow said. The hard-hit Central Valley in California continued to lead the nation in foreclosures, according to Zillow’s study, as more than half of all sales in the Madera, Merced and Stockton metropolitan statistical areas were foreclosures. The New York City metro area and the Grand Junction, Colorado, had the lowest rates of foreclosure in the country, both at 3.9 percent.
Zillow compiles data from multiple listing services, county assessors and recorders, and information from its users.
This article has been reposted from Property Wire. View the article on Property Wire’s international real estate news website here.