Home equity shrinks: Property owners lost $3.3 Trillion in 2008

According to the data released yesterday from the National Association of Realtors (NAR), falling home prices, low mortgage rates and foreclosure activity resulted in an up tick in home buying last month.

The NAR’s Pending Home Sales Index rose 6.3% in December after dropping to record low in November.

That provided a glimmer of hope for what’s left of the nation’s housing bulls, who were seen holding a meeting in a phone booth.

Meanwhile beneath the surface, a record 19 million U.S. houses stood empty at the end of 2008 as banks seized homes faster than they could sell them.

That’s the industry’s dirty little secret as the nation’s shadow inventory of distressed properties continues to build. 

Unfortunately, for homeowners that means despite the recent up tick in sales the bottom of the housing market is still nowhere sight since supply will outweigh demand for years to come.

Lower prices in the future then are the only likely result, which at this point is nothing more than adding salt to any already open wound.

In fact, to date some $6.1 trillion in home equity has already been lost since mid 2006—the peak of the housing bubble.

Here’s the sobering story on score from Bloomberg.

It is in a story by Dan Levy entitled: U.S. Property Owners Lost $3.3 Trillion in Home Value Last Year

The U.S. housing market lost $3.3 trillion in value last year and almost one in six owners with mortgages owed more than their homes were worth as the economy went into recession, Zillow.com said.

The median estimated home price declined 11.6 percent in 2008 to $192,119 and homeowners lost $1.4 trillion in value in the fourth quarter alone, the Seattle-based real estate data service said in a report today.

“It’s like a runaway train gaining momentum,” Stan Humphries, Zillow’s vice president of data and analytics, said in an interview. “It’s difficult to say when we’ll see a bottom to the housing market.”

The U.S. economy shrank the most in the fourth quarter since 1982, contracting at a 3.8 percent annual pace, the Commerce Department said on Jan. 30. Record foreclosures have pushed down prices as unemployment rose. More than 2.3 million properties got a default or auction notice or were seized by lenders last year, according to RealtyTrac Inc., a seller of data on defaults.

About $6.1 trillion of value has been lost since the housing market peaked in the second quarter of 2006 and last year’s decline was almost triple the $1.3 trillion lost in 2007, Zillow said.  Values have dropped for eight straight quarters.”

By the way, in 2008 alone there were 2.2 million foreclosures.

That’s an average of 6,090 a day.

The vicious cycle in housing continues.

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