Zillow posted some interesting analysis today in which they claim that 50% of all home buyers who purchased a home in 2006 are now in a negative equity situation - underwater. That’s a mind-boggling stat don’t you think? It’s a coin flip really if you’re ahead or buried. Well probably not a coin flip as it is most likely self-selecting for the folks that stretched on financing in bubblesque territory.
To wit from Inman News on the 90% of the 2006 crop of Las Vegas home buyers who are upside down:
In the Las Vegas metro, about nine out of 10 homeowners who purchased in 2006 owe more than their home is worth.
From Zillow and their take on the housing market:
Conditions continued to worsen in Q1 as U.S. home values continued their slide down with the Zindex posting a 7.7% year-over-year decline, the sharpest decline we’ve ever seen in our data, which extends back to 1996. Not surprisingly, the market decline brought with it increasing rates of negative equity, with one out of two homeowners who purchased during the national market peak in 2006 currently “underwater” on their mortgage, or owing more on their mortgage than the home is currently worth. Even more alarming is the finding that almost 45% of homeowners who purchased last year (2007) are already underwater on their mortgages, a fact that drives home the rapidity of the market depreciation.
Here’s a great graph that represents the percentage of negative equity home owners by year purchased. 2007 was the wrong year to be buying as well.
Of course, the analysis is based on the Zestimates so you have to take it with a grain of salt; but nevertheless it does point to some interesting insight for those folks looking to time the market.
From the looks of the graph it seems clear to me that we are way to early in to this thing to be calling bottom and for pointing out bargains. Nearly a third of buyers from this year (!!) are already underwater which doesn’t inspire a ton of confidence to run out there and try to find a “bargain.” Let’s duly trot out the all real estate is local refrain to placate the glass half-fuller’s but still is it an astonishing reality to anyone else that half of all home owners are underwater who purchased in 2006/2007?
And what does that mean to those markets? How long are the folks who stretched at the top of the market who are now upside down going to stick it out? How many more foreclosures are we going to see out of that ‘vintage’ of home owners? It does not portend a speedy recovery.
As I’ve said in the past don’t worry about missing this real estate bottom. As long as you’re not dead you’ll be able to spot it and take advantage of it. If you’re shopping for a home take your time if you value your money.
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