US Housing Market Thought to Have Lost $1.7 Trillion of Value in 2010

Zillow, the US's second largest property portal has predicted that the value of US homes will be down $1.7 trillion this year compared to last year.

This, compared to the $1 trillion loss in value last year compared to 2008, represents a 63% larger decline, and means that the US housing market has lost $9 trillion in value since the collapse began in 2006. While many markets around the world have apparently fallen faster and harder than the states, few can match a decline like that.

As we would expect, the portal reports that the largest falls happened in the second half of the year. With the homebuyer tax credit propping up the market, the housing market lost $700 billion in the first half, and with the tax credit rug firmly pulled out from below prices the second half loss is predicted to be $1 trillion according to Zillow.

"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," said Zillow Chief Economist Dr. Stan Humphries.

And it may not get much better.

"Unfortunately, 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," Humphries said.

While the value of homes in Boston increased by $10.8 billion and those in San Diego by $10.2 billion, it was the most overvalued cities which really dragged the overall picture down. In New York, the value of homes has fallen a whopping $103.7 billion this year, and in Los Angeles it has fallen by $38.7 billion.

According to the big investment banks, the American economy is turning around, the picture seems to be continuing to worsen for the housing market.

According to reports in the third quarter, 23.2% of single family home owners owed more on their mortgage than the value of the property, up from 21.8% in the third quarter of 2009. Until defaults and repossessions are brought under control, and the backlog of properties sold there is unlikely to be any recovery. Of course, with investors snapping up properties at 60% below their replacement costs and earning 10% yields on tenanted properties, many are in no rush for recovery anyway.