Monthly Depreciation in February 2010 Remains Stable, but Calls Timing of the Bottom into Question

RISMEDIA, April 19, 2010—The February Zillow Real Estate Market Reports are out, and show continued depreciation in home values across much of the country. The national Zillow Home Value Index fell 5.4% year-over-year, and fell 0.5% month-over-month.

The good news is that the rate of monthly decline has improved over the past year. Home values fell 0.8% from January 2009 to February 2009, compared with a 0.5% decline from January 2010 to February 2010.

But the bad news is that, in early 2009, the rate of decline was shrinking (from -1% in January to -0.8% in February), signaling the market was heading toward a bottom. In the past few months, month-over-month changes are holding flat or getting worse – a trend which could slightly extend the time it takes to reach bottom—See chart for historical context.

Of the 25 largest markets for which we have data, two – Las Vegas and Philadelphia – saw positive month-over-month change, while another two – L.A. and San Francisco – remained flat. Additionally, almost 1 in 1,000 homes foreclosed in February, which is near the historical high-water mark. Foreclosure re-sales as a percentage of all transactions notched up again in February to 22.35%.

Current monthly changes in home values add substantial downside risk to our forecast that home values will reach bottom by June 2010. We’ve been expecting that monthly depreciation rates would stay negative but improve slightly in the first half of this year, but we’ve seen much less traction in reducing monthly depreciation rates than we expected.

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