On May 9 Zillow.com released a Press Release titled “First Quarter Home Value Declines Match Worst of Housing Recession; Bottom Unlikely to Appear Before 2012” with the subtitle “Home Values Show Sharpest Quarterly Decline Since 2008; Negative Equity Rises to 28.4% According to Q1 2011 Zillow® Real Estate Market Reports”
(Other stories regarding this Press Release were found at a May 9 Bloomberg story, “U.S. ‘Underwater’ Homeowners Increase to 28 Percent, Zillow Says” and CNBC.com article of May 9 “Homeowners Drowning in Negative Equity”)
I think it is important to note how quickly the percentage of “underwater” mortgages is increasing relative to the decreases in home prices. As well, it is important to note that the 28% figure quoted above is a national average; as seen in the Press Release detail, there are many metropolitan areas with significantly higher figures. Furthermore, it should also be noted that there are various ways to estimate and measure the percentage of “underwater mortgages,” and as such the 28% figure may be understated if another methodology were to be used.
As I have written of previously, the residential real estate market is highly complex and, in my opinion, widely misunderstood. The increasing rate of “underwater mortgages” should be of great concern, as it likely will feed the growth of various other problems such as “strategic defaults.”
Falling residential real estate prices remain a severe threat to the economy.
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1337.77 as this post is written