US home values fall $9 trillion since 2006, says Zillow

American real estate, a traditional bastion of household wealth for the middle class, has lost $9 trillion in equity since 2006 according to the real estate marketing site Zillow.com.

Zillow reports that US homeowners lost $1 trillion in 2009 and it expects that losses will total $1.7 trillion in 2010. Specifically, Zillow estimates that values dropped by $1 trillion in the second half of 2010 compared with $600 billion for the first six months of the year.

“By comparison,” says Zillow, “from 2001 to the end of September 2010, the war in Iraq has cost $750.8 billion.

Only 31 of 129 markets tracked by the company showed gains in 2010. Negative equity for mortgages properties — situations where the loan balance was greater than the value of the home — reached 23.2 percent in the third quarter of 2010 versus 21.8 percent at the end of 2009.

Tax Credit Impact

“Despite a strong start to 2010, by the end of the year homes lost more of their value in 2010 than they did in 2009,” said Zillow Chief Economist Stan Humphries. “Government interventions like the homebuyer tax credit helped buoy the market during the second half of 2009 and the first half of 2010, but we saw a renewed downturn in the last half of this year. It’s a testament to the nearly irresistible force of the overall market correction that government incentives can only temporarily hold back the tide, and that the market will ultimately find its natural equilibrium of supply and demand.”

However, the reason the tax-credit for first-time homebuyers could only “temporarily hold back the tide” was not because it was ineffective but because it ended with sale agreements made no later than April 30, 2010.

Looking Ahead To 2011

“Unfortunately,” says Humphries, “with foreclosures near an all-time high in late 2010 and high rates of negative equity persisting, it does not appear that the first part of 2011 will bring much relief.”

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