U.S. homes could decrease $1.7 trillion in value, report says

U.S. homes could decrease $1.7 trillion in value, report says

2010-12-09 20:46:32 GMT+7 (ICT)

SEATTLE, WASHINGTON (BNO NEW) -- U.S. homes are forecast to decrease more than $1.7 trillion in value during the current year, which is 63 percent more than the $1 trillion lost in 2009, according to a Zillow Inc. report.

That brings the total value lost since the market peaked in June 2006 to $9 trillion. By comparison, from 2001 to the end of September, the war in Iraq has cost $750.8 billion, according to a September report by the Congressional Research Service.

"Despite a strong start to 2010, by the end of the year homes lost more of their value in 2010 than they did in 2009," said Zillow Chief Economist Dr. Stan Humphries.

The bulk of the total value lost during the year was in the second half of the year. Furthermore, from January to June, the housing market lost $680 billion, and from June to December, Zillow projects residential home value losses will top $1 trillion.

"Government interventions like the homebuyer tax credit helped buoy the market during the second half of 2009 and the first half of 2010, but we saw a renewed downturn in the last half of this year," Humphries added. "It's a testament to the nearly irresistible force of the overall market correction that government incentives can only temporarily hold back the tide, and that the market will ultimately find its natural equilibrium of supply and demand."

"Unfortunately, with foreclosures near an all-time high in late 2010 and high rates of negative equity persisting, it does not appear that the first part of 2011 will bring much relief."

Declines in home values have led to increases in the percentage of homeowners in negative equity. At the end of 2009, 21.8 percent of single-family homeowners with mortgages were in negative equity, meaning they owed more on their mortgage than their home was worth. In the third quarter of the current year – the last time Zillow calculated negative equity – 23.2 percent were underwater.

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