U.S.home slump puts owners under water, as reported by Zillow

Home values dropped 7.7 percent nationally in the first quarter and five California metropolitan areas were among the markets whose prices plunged by the highest percentage year over year and whose homeowners had high rates of negative equity, according to a report issued Tuesday by Zillow. Nationally, a little more than half of homeowners who purchased during the 2006 market peak today owe more on their home than its current value.

130 of 160 metro markets included in the survey now are priced lower than a year ago. Among the California markets suffering the greatest decline: Stockton (-33.5 percent), Riverside/San Bernardino/Ontario (-26 percent), Greater Sacramento (-20.5 percent) and Los Angeles/Long Beach/Orange County (-16.4 percent).

Despite the year-over-year decline, the nation as a whole and the four California markets cited as having the greatest decline experienced gains when home prices are annualized over five years. Home prices experienced a net gain of 4.7 percent nationally over five years, 6.2 percent in Los Angeles/Long Beach/Orange County, 5.8 percent in Riverside/San Bernardino/Ontario, 1.5 percent in Greater Sacramento, and 0.3 percent in Stockton.

Zillow calculated that 95.8 percent of Stockton-area homeowners who purchased in 2006 now owe more than their home is worth: In Riverside/San Bernardino/Ontario the number stands at 88.5 percent; in Los Angeles/Long Beach/Orange County the number is 71.6 percent; and 69.4 percent in Sacramento.

Owing more than a home is worth may not be a problem for homeowners who can afford the monthly payment or who plan to stay in the home for an extended period. Those most affected are people who have lost a job or obtained a mortgage they couldn’t afford, those seeking to refinance into a lower or fixed interest rate, or those whose circumstances require them to sell now.