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Website Zillow.com recently released their market reports for the nation and 145 metro areas. With 17 consecutive negative quarters, the length and severity of the current downturn are rivaling the great depression.  The report also shows a record number of homeowners are underwater with the mortgage.

Here is a snapshot of National Numbers

• U.S. home values continued to decline in the third quarter, falling 4.3 percent year-over-year, and 1.2 percent quarter-over-quarter.
• Negative equity rose to 23.2 percent of single-family homes with mortgages, the highest it has been since Zillow began tracking it in the first quarter of 2009.
• In five markets, all in California – Los Angeles, San Diego, San Francisco, San Jose and Ventura – home values turned negative quarter-over-quarter after five quarters of gains.
• Foreclosures reached an all-time high at the end of the third quarter, with more than one out of every 1,000 homeowners losing their homes to foreclosure in September.

The full national report, in its interactive format, is available at   www.zillow.com/local-info.

Fiserv, a market analytics company, has scaled back its home price projections considerably. In February, it forecast national price gains of about 4% through the end of 2011. The company’s latest prediction is for a 7.1% drop in prices between June 30, 2010 and June 30, 2011.  In fact, after five months of gains, prices in the 20 largest metro areas fell 0.2% in August, according to the latest S&P/Case-Shiller report.  The good news is, “There’ll be no vicious, self-reinforcing spiral down,” according to Mark Zandi, chief economist with Moody’s Analytics.  But, he added, “more home price declines are coming.”   He’s forecasting another 8% drop in home prices through the third quarter of 2011, which will put the total peak-to-trough decline at 34%.  Even after that, in 2012, he sees very little price growth.

Home prices continue to fall because sales aren’t taking off. Without buyers, the market can’t bottom out.  New home sales continue to languish around historic lows, barely exceeding an annual rate of 307,000. Existing home sales did rise to a 4.53 million annualized rate in September, up 10% compared with a month earlier, but are still well below the boom years.  Of course, nobody is buying homes when they can’t find jobs. And still more people can’t hang on to their homes because they’re out of work.  Nearly a million homes are expected to be repossessed this year, and analysts seem to be competing to issue the most dire forecast for future foreclosure numbers.

- Morgan Stanley reported that about 3.1 million borrowers are seriously delinquent with many expected to lose their homes.

- Zandi said more than 4 million are in trouble with half of those expected to go to foreclosure.

- And Laurie Goodman, of Amherst Securities, estimates the number of homes in danger of foreclosure at a whopping 11 million.

- Real estate analyst Kyle Lundstedt of LPS Applied Analytics said serious delinquencies will continue to spike and will not return even to the current rates — which are already at peak levels — until late 2012 or early 2013.

Foreclosed homes dot the American landscape — they make up about one in 12 houses with under $1 million left on the mortgage. These foreclosures drive down home prices, both because they add to the housing supply and because the financial firms that acquire the houses want to unload them promptly.

However, since foreclosures often occur in economically struggling areas, it is hard to determine how much of the drop in a home’s value is due to its foreclosure, and how much can be blamed on the economy in general.

Now, in a recent working paper, MIT economist Parag Pathak and two Harvard researchers, John Y. Campbell and Stefano Giglio, have put a price tag on foreclosures. Specifically, they’ve determined how much a foreclosure dents a home’s value, as opposed to a home going on the market because the owner has died or declared bankruptcy. Moreover, they’ve demonstrated how much foreclosures depress the prices of the houses around them, a finding that should capture the attention of home-owners and policy-makers.

Read the rest of the story

Download Forced Sales and House Prices Report.