Zillow Reviews Bumpy Road Toward Stabilization

Home values in the United States fell 0.4 percent from the first to the second quarter of 2011, the smallest quarterly decline in more than four years, according to Zillow's second quarter Real Estate Market Reports. The Zillow Home Value Index fell 6.2 percent year-over-year to $171,600. Home values have fallen 28.8 percent since they peaked in June 2006.

Regionally, home values fell on a year-over-year basis in 142 of the 154 metropolitan statistical areas (MSAs) covered by Zillow and were flat in eight. In the short term, however, nearly two-thirds of MSAs (94 of 154) experienced home value appreciation, with the Zillow Home Value Index rising from the first to the second quarter.

Negative equity fell slightly to 26.8 percent of single-family homeowners with mortgages in the second quarter, down from 28.4 percent in the first. A homeowner is in negative equity when they owe more on their mortgage than their home is worth.

Meanwhile, the rate of foreclosure re-sales declined from its peak in March 2011, when 21.4 percent of all sales were foreclosure re-sales. In June, 19.7 percent of sales were foreclosure re-sales.

"While there are many positive signs in the second quarter, and it is clear the post-tax credit free-fall of home values is over, we're not out of the woods yet," said Zillow Chief Economist Dr. Stan Humphries. "It is very encouraging that two-thirds of markets in our report experienced home value appreciation, but we have to remember that this is coming on the heels of one of the worst quarters since the housing recession began.

"We expect a bumpy road ahead. There will be many ups and downs in home values before this is over, and we continue to expect a true bottom in 2012, at the earliest. There are still hazards in the form of a full foreclosure pipeline, high negative equity and fluctuations in demand."

While nearly two-thirds of markets showed appreciation from the first to the second quarter of 2011, far fewer have recorded a longer period of stabilization. Only 25 of the 154 MSAs covered in Zillow's Real Estate Market Reports showed two consecutive quarters of appreciation. Among those MSAs were Washington, D.C., where the median home value increased 1.7 percent from the first to the second quarter after increasing 0.2 percent from the fourth quarter of 2010 to the first of 2011; and Pittsburgh, where home values increased 2.8 percent from the first to the second quarter, and increased 0.1 percent from the fourth to the first quarter.