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Home values lose $9 trillion since 2006 peak

2010 sees home prices sink by $1.7 trillion. Falling taxes deprive communities of crucial services.

By Karen Datko Dec 10, 2010 10:33AM

This post comes from Marilyn Lewis of MSN Money.


Since housing values started plummeting in 2006, the U.S. housing market has lost almost $9 trillion -- enough to fund 12 Iraq wars. That's the news from researchers at Zillow, the online real estate marketplace.


A big chunk of that loss -- $1.7 trillion -- was shed in 2010 alone.

"That's 63% more than the $1 trillion in value that homes lost last year," The Wall Street Journal points out. Post continues after video.

In 2010, real estate saw two phases:

  • The first half of the year looked promising, as sales revved up on the strength of the homebuyer tax credits. Even so, the total value of American properties fell $680 billion from January to June.
  • The losses picked up steam in the second half of the year; Zillow predicts property values will have fallen an additional $1 trillion from June to the end of this year.

Zillow's chief economist, Stan Humphries, told the Journal:

"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," he said. "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."

Gains amidst the losses

The Zillow press release includes a table showing the changes in value in 2009 and 2010 in the 20 largest cities it analyzed. Cities where losses exceeded 10% in 2010 include:

  • Miami-Fort Lauderdale (-15.4%).
  • Atlanta (-14.5%).
  • Detroit (-13.9%).
  • Phoenix (-13.0%).
  • Seattle (-11.6%).

But not all cities saw property values drop.

Places like the Boston and San Diego metropolitan statistical areas (MSAs) actually saw an increase in total market value .... It's important to point out that most of these gains were made in the first half of the year, before the effect of the homebuyer tax credits wore off, but an increase still represents good news for homeowners.

Property values grew in three large cities -- San Diego (2.3%), Riverside, Calif. (1.2%), Los Angeles (0.8%) and Boston (0.7%).

The Zillow analysts concluded with more of a wish than a forecast:

Thanks to high rates of foreclosure and negative equity, it does not appear that the first half of 2011 will bring much relief. However, the hope is that the market will reach a bottom sometime next year, and that average rates of appreciation will return sometime in the next three to five years.

Last month, Investors Daily noted that home values had fallen for 17 straight quarters. With prices now 25% below their June 2006 peak, this housing recession rivals the Great Depression, when home values fell 25.9% in five years.


Wrote one Zillow reader,"Kevin Morales Properties":

I personally have never seen the market this bad in my 15 years as a licensed real estate agent. Home builders here in Austin are going to extremes to sell new homes just sitting idle. The problem is no one is buying because of concern about our economic future.

Not just paper losses

For those tempted to see these losses as merely hypothetical, a Bloomberg article, "Tax appeals swamp US cities, towns as property prices plunge," makes clear at least one serious effect being felt by communities around the nation:

From Los Angeles to Atlantic City, the New Jersey gambling resort whose credit rating Moody's Investors Service cut by three levels last month, property owners are demanding lower taxes after real estate values plunged. The disputes over billions in dollars come as municipalities are already slashing services such as police and fire protection and may depress revenue further as communities try to recover from the longest recession since the 1930s. In Michigan, Governor-elect Rick Snyder has warned that hundreds of towns face financial crises.

"If the appeals are largely successful, they will generate a lot more appeals," predicts Michael Pagano, dean of the College of Urban Planning and Public Affairs at the University of Illinois at Chicago.


Douglas Roberts, a former Michigan state treasurer, told Bloomberg that the effect on ill-prepared cities and towns "could be significant." Already, cities are struggling with rising pension and health care costs and declining revenue.


In Miami, the number of property tax appeals is falling. But, mostly, Bloomberg says, the numbers of taxpayers appealing their bills is growing. Los Angeles, for example, reports four times the appeals as it saw in 2007.


Bloomberg continues:

In Illinois, pleas for relief arrive every week on the desk of Louis Apostol, executive director of the state Property Tax Appeal Board.
"These letters are heart-wrenching. I've got drawers and drawers of them," Apostol said in a telephone interview from his office in Des Plaines.

More from MSN Money:

Jan 2, 2011 11:57AM

fact of the matter is that home values will never be

what they was a bubble and nothing more

as baby boomers retire and sell demand will decrease

further..even in fla there are too many homes built

on speculation will take years to unwind...and

if interest rates continue upward mortgages will be

more expensive..and will also crimp demand...


Dec 10, 2010 2:37PM
Remember the the old saying, "You can't loose money in real estate".
Dec 10, 2010 2:06PM
These figures are based on market that was entirely over-inflated and bogus.  Homes on my block, an admittedly modest neighborhood, were selling for as much as $275,000 at the height.  I bought my home for $145,000 in 2004 and by 2006 I could have sold it for $265,000 (I know, but water under the bridge, besides, I happen to like my home).  So this article and its numbers are MEANINGLESS.
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