Sellers have lost money on nearly half of homes sold across the Valley in the past year, and nearly a third of homeowners owe more on their mortgages than their homes are worth, according to Zillow.com's third-quarter real estate market report.
Nationally, one-third of homes sold lost money as home values fell 9.7 percent year-over-year to a median of $202,966, according to the online real estate service. In the Phoenix-Mesa-Scottsdale area, home values fell 19.4 percent year-over-year to a median of $195,947.
Pinal County was hit worse, with values falling 25 percent.
"Phoenix isn't doing too good," said Katie Curnutte, Zillow.com spokeswoman. "In the past 12 months, 37.9 percent of all (home sales) have been foreclosures, and that's compared to 18.6 percent for the nation. Foreclosures tend to drive down even values of homes that aren't being touched by foreclosures directly. Things like abandoned houses tend to have an effect on the neighborhood surrounding them."
Valley home sellers lost money on 49 percent of the houses sold in the past year. And more than 30 percent of all homeowners in the Phoenix-Mesa-Scottsdale area have negative equity, meaning they now owe more on their mortgages than their homes are worth, according to Zillow.com. For buyers who purchased at the peak of the market in 2006, 77 percent now have negative equity.
"Negative equity is a precursor to foreclosure," Curnutte said. "That said, not everyone who has negative equity is going to even notice it. There are going to be a lot of people who are in negative equity, but their jobs are stable, they're paying their mortgage on time, they're not having trouble meeting those commitments, and those people will come out on the other side of this fine."
However, negative equity means fewer options for those right on the edge financially, she said.
"The reason there are so many upside-down (homeowners) in the Phoenix area is home values have declined more rapidly than in most of the markets in the nation," Curnutte said. "From 2000 to 2004, appreciation was steady at about 6 percent and then in 2004 it just shoots up, it's almost a cliff. In any market where that happened, we're seeing a pretty steep decline on the other side as well."
Gayle Henderson, a certified distressed property expert with RE/MAX Excalibur in Scottsdale, said homeowners should do all they can to avoid foreclosure, and that short sales are a better alternative. In a short sale, the homeowner sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds to the lender usually in full satisfaction of the debt.