Real Estate & Mortgage Insights

Home Values Have Plunged $6.4 Trillion since Market Bust

The latest reading from the S&P/Case-Shiller Home Price Index shows a 1.2 percent decrease across the country in October from the previous month. Nineteen out of twenty major cities posted home value losses, a trend that has been bumping along for a few years now.

While the monthly figures are disappointing, they are only a small piece of the overall picture. According to analysis from Zillow, U.S. homes are expected to lose roughly $681 billion in value in 2011. If that prediction pans out, U.S. homes will have lost a total of $6.4 trillion in value since the beginning of the 2007 housing market crash.

Fortunately, this trend seems to be waning. This year's total is down 35 percent from the $1.1 trillion in value lost from 2010. What's more, most of 2011's price declines took place in the first half of the year between the months of January and June falling by $454 billion. During the last six months, we saw a much slower pace of decline.

"Homes are losing value at a substantially slower pace as the market works its way towards the bottom," said Zillow Chief Economist, Stan Humphries, in a release. "This year we saw some organic improvement in home values, in terms of a slowed depreciation rate which resulted in a smaller total value loss for the year."

Zillow predicted that these housing losses would slow until they reach bottom in "late 2012 or early 2013."

Still, home value losses continue to occur in most of the country, with 92 percent of the regional housing markets analyzed having lost value this year. The largest declines were seen in the metropolitan statistical areas (MSAs) of Los Angeles, which had fallen by $75.5 billion, New York, which was down $44.8 billion and Chicago, with a loss of $41.7 billion.

The few bright spots on the horizon were the New Orleans MSA, where home values gained by $3.5 billion, and the Pittsburgh MSA, which saw a value increase of $2.7 billion.

The upticks in these areas lens credence to the statements from David Blitzer, chairman of the Index Committee at S&P Indices. Based on the yearly data of housing market prices, he thinks there has been a fundamental shift in the market.

"In 2008 and 2009, it was a national housing market. Everything was collapsing together," he said. "One thing that's happened in the past couple of years is that it's going back to being more of a local market phenomenon."

"The old adage 'location, location, location' is coming back to have a lot of meaning. Three years ago it didn't matter where you were looking at housing in the United States, prices were collapsing," Blitzer added. "Now when you look around the country, you find some differences."

Analysis of the S&P index data shows that while the housing market as a whole saw a 3 percent annual home price decline for 2011, on an individual basis 14 of the 20 cities saw yearly improvement.

This might mean that over the next several months we could start to see some real stabilization in many regions of the country while just a handful of the hardest hit areas take some more time to work out their housing woes.

Featured Articles