Business Times - 08 May 2008
US home slump puts owners 'underwater'
Values fall 7.7% in Q1 to lowest point in nearly 3 years
(NEW YORK) US home values dropped 7.7 per cent in the first quarter to the lowest in almost three years, according to estimates by Zillow.com, an online data provider.
The decline is the biggest in 12 years of data compiled by Seattle-based Zillow.com, a website started in 2006 to provide homeowners, real estate agents and potential buyers with value assessments called 'zestimates' for single-family homes, cooperative apartments and condominiums.
US house prices dropped for the first time since the 1930s last year, discouraging buyers who fear being 'underwater' on their mortgage, or owing more on their home than it's worth. That's already happened to almost 52 per cent of homeowners who bought in 2006 when prices peaked, Zillow estimates.
At the same time, record foreclosures are adding to a glut of unsold homes and driving prices down further.
'It's clear evidence that the fundamentals of those housing prices were not sustainable,' Zillow vice-president of data and analytics Stan Humphries said in an interview on Tuesday. 'That's definitely aggravated nationwide by the liquidity crisis.'
Financial institutions have reported at least US$318 billion in mortgage-related losses and asset writedowns since the beginning of last year.
The proportion of banks tightening lending standards for even prime borrowers rose last quarter to about 60 per cent from 53 per cent, according to the Federal Reserve's Senior Loan Officers' Survey.
The survey, published on Monday, also indicated that the share of banks making it tougher for companies and consumers to borrow approached a record after the sub-prime-mortgage collapse made them more reluctant to lend.
'The inability to secure refinancing is ultimately contributing to the growing rates of foreclosure in many parts of the country,' Mr Humphries said. -- Bloomberg
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