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Report: 40 percent of homes sold in region in past year did so at a loss
Like most home buyers, when Lanor and Diane Smith purchased their five-bedroom South Riding colonial in 2006 for $867,143, they never imagined its value could sink so far, so fast. But that was before they put it back on the market earlier this year.Its price now: $629,900.
"It’s a shock,” Lanor Smith said. “We didn't expect it to drop the way it did ... but it’s priced at what the market will allow.”
The two are now negotiating a short sale on the home, where the lender will absorb most of the difference between the sale price and what the owners had remaining on their mortgage -- a process that does damage credit scores.
The Smiths are not the only sellers taking a financial hit in this depressed real estate market. Nearly 40 percent of the homes that sold in the Washington, D.C., region in the 12 months prior to October 2008 did so at a loss to the seller, according to a new report by the real estate valuation site Zillow.com. Nationally, the amount was 30 percent.
Just as alarming, according to the same report, one in every seven homeowners across the country now owe more on their mortgages than their homes are worth, otherwise known as being “underwater.”
"It's clear we are at a unique point in history,” said Stan Humphries, Zillow vice president of data and analytics, in a statement. “We've had seven consecutive quarters of decline [in home values], and we expect that to continue until at least the middle of next year.”
The Zillow report looked at 163 metropolitan areas across the country. One of the most distressed markets is Stockton, Calif., where 70 percent of new homeowners are now considered underwater.
In the Washington, D.C., region, one in five homeowners has negative equity on a home, the report said. The hardest-hit areas are Prince George's County in Maryland and Prince William, western Fairfax County and the Sterling section of Loudoun County, where about one in two homes purchased over the last five years is worth less than what it was purchased for.
Dean Megginson is a Leesburg-based agent who maintains a blog on the real estate market. Megginson said he questioned whether Zillow's “automated programs” can accurately determine home values. Still, he said underwater homeownership is certainly a problem locally that takes "psychological and emotional" tolls on owners.
He recounted the tale of one local underwater owner who is considering selling her home.
"She feels like she is suffocating," he said. "She doesn't have the money to pay the underwater shortfall to sell her house on the open market, and is stuck unless she walks away or slowly loses money on renting out the house."
One South Riding resident who asked to remain anonymous bought her Ashburn townhouse in 2006 for $530,000. However, a drop in income forced her to put it on the market in 2007. She sold it in a short sale in September for $330,000.
"It makes you feel terrible that you are in this situation," she said. "It just ended up being a mess."
She added: "I don't think I will buy again. But if I did, I would hope I would pay with all cash."
The Zillow report also said 90 percent of all homes in the Washington region lost value the past year, compared to 74 percent nationwide.
The median home price in Loudoun, according to the latest data from the Dulles Area Association of Realtors, now stands at $310,000, down from $414,000 a year ago.
Contact the reporter at jjacks@timespapers.com
What do mean housing prices don't go up forever.
This dramatic drop in housing values shouldn't come as a shock to anyone who has even the slightest understanding of economics. It may suck for a while, but a restoration of reasonable housing prices when compared to income will be good for the economy.
Posted by johnarlington
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