The long anticipated double-dip in home prices has arrived.
Also see: Less filling ‘double-dip’ doom looms
And it comes with the lowest interest rates of the year, but tight credit and slow employment gains aren’t allowing buyers to cash in on renewed affordability.
U.S. home values fell 3 percent from the last quarter 2010 to the first quarter this year, posting the largest quarter-over-quarter decline since the fourth quarter of 2008, when many thought the housing market had bottomed, according to the Zillow Home Value Index.
Now, says Zillow, a new home price bottom isn’t likely until 2012, according to Zillow’s revised forecast.
Zillow said the first quarter home value decline matches the worst of the housing recession thus far. Negative equity reached a new high — 28.4 percent of all single-family homeowners suffer mortgages that are underwater (the mortgage is greater than they home is worth), up from 27 percent in fourth quarter of 2010.
Zillow said home values are down 8.2 percent since the first quarter last year and down 29.5 percent since they peaked in June 2006.
The report is similar to Clear Capital’s findings which found home prices dropped 4.9 percent quarter-to-quarter, slid 5 percent year-over-year and now stand at 42 percent below the market peak in mid-2006.
Clear Capital also reported home prices are 0.7 percent below the prior low set in March 2009.
A growing number of distressed properties flooding the market are contributing to the double dip in home prices.
Zillow said foreclosures rose throughout the first quarter as banks unfroze moratoriums and allowed foreclosures to resume. Foreclosures had fallen in late 2010, due to the slew of moratoriums brought about by the “robo-signing” controversy.
RealtyTrac reported foreclosure filings on 239,795 U.S. properties in March this year, a 7 percent increase from the previous month. The figure was down from 367,056 a year ago March, RealtyTrac’s highest monthly foreclosure total since 2005.
Contributing to affordability that comes with lower home prices, interest rates last week fell to an average 4.71 percent for 30-year, conforming, fixed-rate mortgages (FRMs), matching the year’s lowest rate originally set back on Jan. 13, according to Freddie Mac’s weekly Primary Mortgage Market Survey.
Unfortunately, credit remains tight and employment unstable. Unemployment rose to 9 percent in April, after falling from 9.4 percent in December 2010 to 8.8 percent in March this year.
“Home value declines are currently equal to those we experienced during the darkest days of the housing recession. With accelerating declines during the first quarter, it is unreasonable to expect home values to return to stability by the end of 2011,” said Zillow Chief Economist Dr. Stan Humphries.
“We did expect substantial payback from the homebuyer tax credits, which buoyed the housing market last year, but underlying demand post-tax credit, as well as rising foreclosures and high negative equity rates, make it almost certain that we won’t see a bottom in home values until 2012 or later,” Humphries said.