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Zillow: Market Will Not See Bottom Until at Least 2012

Home values nationally have fallen 28.8 percent since their peak in June 2006, and we expect them to decline another 3-5 percent before reaching a definitive bottom in 2012, at the earliest.

On a year-over-year basis home values were down 4.4 percent with the Zillow Home Value Index at $171,500 (Figure 2).

Unemployment and negative equity, paired with fragile consumer confidence, remain the key factors preventing the housing market from stabilizing. We see little evidence that the recent reductions in the conforming loan limits have materially impacted the market, and data from the Zillow Mortgage Marketplace indicate that borrowers below the old limit and above the new limits are getting rates about 25 basis points higher than they were before. According to our estimates, these changes affected less than 0.75 percent of all homes in the country.

Negative Equity
National negative equity edged up slightly to 28.6 percent of all single-family homes with mortgages, compared to 26.8 percent in the second quarter. Negative equity fell in the second quarter on the basis of sharp improvements in depreciation rates and flat foreclosure rates. This quarter, however, home values remained relatively flat while foreclosure rates slowed further, and these two factors combined to increase negative equity.


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