Last Updated Apr 26, 2011 4:50 PM EDT
U.S. home values declined further in the fourth quarter of 2010, posting their largest quarter-over-quarter decline since Q1 2009 according to Zillow's fourth quarter Real Estate Market Reports.
Home values dropped 2.6 percent, and the effects of the home buyer tax credits are being blamed.
Worse, negative equity (also known as underwater mortgages - where home are worth less than the mortgages attached to them) rose to 27 percent of all single-family homes with mortgages. That's up from 23.2 percent in Q3 2010.
Let's take a closer look at the home buyer tax credit connection.
When they were in effect, the home buyer tax credits tempered home values declines â€" nationally, home values fell only 0.9 percent from the first to the second quarter of 2010 â€" but values resumed their decline after the tax credits expired, falling 2.6 percent from the third to the fourth quarter.
With the end of the home buyer tax credits in mid-2010, home value declines accelerated toward the end of the year.
"While the tax credits did not hurt the housing market, they did delay its bottom by interrupting the housing correction that was taking place," said Dr. Stan Humphries, Zillow chief economist.
"The good news is that these declines, while painful in the short-term, mean we're getting closer to the bottom. The housing recession is likely in its death throes, and we expect to see sales pick up in early 2011."
Foreclosures fell due to bank moratoriums and more drawn-out foreclosure processes following the "robo-signing" controversy. In December, less than one out of every 1,000 (0.09 percent) homes in the country was lost to foreclosure, down from 0.12 percent in October, when they peaked. However, foreclosures are expected to rise again in early 2011.
Key Facts from the Report:
- The Zillow Home Value Index declined 5.9 percent year-over-year in the fourth quarter to $175,200.
- Home values have fallen 27 percent since they peaked in June 2006.
- Accelerating home value declines, as well as a slowdown in the nation's foreclosure rate contributed to an increase in negative equity.
- 0.09 percent or less than one in every 1,000 U.S. homes were liquidated in foreclosure in December, down from 0.12 percent in October, when foreclosure liquidations peaked.
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.