Report: New homeowners’ debt often exceeds value

Nearly one in four Greater Providence homeowners who bought in the past five years – and nearly one in three nationwide – are “underwater,” with mortgage debt exceeding their properties’ current value, real estate data provider Zillow.com said in its second-quarter housing market report.
In the Providence metropolitan area, which includes New Bedford and Fall River, 22.2 percent of homeowners who bought in the last five years were “underwater” in the second quarter and 35.4 percent of houses that changed hands in the period were sold at a loss.
The median value for all Greater Providence homes sold in the second quarter was $259,000, a decline of 1.1 percent from the first quarter and 11.3 percent from the 2007 second quarter, Zillow said in the report released last week.
Year-over-year declines were seen in every community. The median value of all homes in Providence fell 13.6 percent year-over-year to $199,002; New Bedford fell 11.5 percent to $207,534; and Fall River fell to 9.6 percent to $226,528.
The metro region’s steepest declines were in Exeter (-9.7 percent), Middletown (-20.1 percent), Richmond (-17.5 percent), Rumford (-16.6 percent) and Bristol (-15.9 percent). The smallest declines compared with a year ago were in Johnston (-0.1 percent), Jamestown (-1.1 percent), Newport (-4.1 percent), and Tiverton and Portsmouth (tied at -5.4 percent).
Zillow.com’s quarterly reports now include data for 160 metropolitan statistical areas, including Norwich-New London, Conn., and Greater Worcester. The median value in the Norwich-New London area fell to $239,000 in the second quarter, a decline of 4.8 percent from the preceding quarter and 8.9 percent from a year ago, Zillow said. And in the Worcester area, although the median home value edged up 0.41 percent compared with the preceding quarter, to $242,000, it fell 8.8 percent year-over-year.
Nationwide, “almost one-third of homeowners who bought in the last five years [were] in negative equity,” Zillow said. The average home value nationwide in the April through June period was $213,000, a decline of 1.14 percent compared with the first quarter and 9.9 percent compared with the year-ago period.
“The highest rates of negative equity are among those who purchased in 2006, when most markets peaked,” the company said in a statement. Greater Providence sales prices peaked in the third quarter of 2005 at $309,534 and have since fallen 16.3 percent.
“The second quarter is the sixth-consecutive quarter of home value declines and we see little promise of turnaround in the short-term,” Stan Humphries, Zillow’s vice president of data and analytics, said in a statement last week.
“The high rates of negative equity are having a direct effect on home-sales figures, as we’ve seen considerable growth in foreclosure transactions and homes selling for a loss,” Humphries added. “Unfortunately, while there are a few bright spots – like Pittsburgh, Oklahoma City and Austin that reached record-high values – most markets are likely to remain in negative territory for the next few quarters given the magnitude of current year-over-year declines.”
In the longer term, however, home values continue to rise. Sale prices are higher than they were five years ago in 90 percent of markets nationwide, “and every market has shown positive appreciation over the past 10 years,” the company said. •