Tuesday, February 3, 2009

Bay Area Real Estate Drops 202 Billion in 2008

From the San Francisco Chronicle Bay homes lost $202 billion in value in 2008

Bay Area homes lost $202 billion in value in 2008, according to a real estate valuation service. The jaw-dropping number, courtesy of Zillow.com, totals the equity lost in all homes in the nine counties as real estate values tumbled under the pressure of foreclosures, recession and tightened lending standards.

"It's an increasingly negative picture in that market," said Stan Humphries, vice president of data and analytics for Zillow in Seattle.

Zillow said home values for the area fell 18.3 percent in the fourth quarter compared with a year ago, reaching a median value of $503,397. That was bigger than the overall U.S. decline of 11.6 percent in the quarter.

The Bay Area "is definitely in the pack of metropolitan areas that are declining worse than the national average," Humphries said. "Those areas are our usual suspects - metro areas in California, Florida, Phoenix, Las Vegas and Detroit."

What those areas have in common is boom-time speculation mania that artificially fattened prices, which are now deflating.

…Zillow's report showed that 27 percent of Bay Area homeowners now have negative equity, meaning they owe more than their home is worth. That's a grim indicator, because being underwater, as the condition is also known, increases the likelihood of foreclosure.

Nationally, about 1 in 6 (17.6 percent) of all homeowners were underwater at year-end, Zillow said, up from 1 in 7 in September.

"Negative equity is a definite driver for foreclosure rates," Humphries said. "That plus a triggering event like death, divorce or loss of a job - the options for navigating that distressing event will be limited."

Increasingly, homeowners with significant negative equity are choosing to surrender their house to foreclosure even without a "trigger" event like losing a job, Humphries and other experts say.

"People feel some futility in making those payments and are walking away from homes," he said.