Based on those results, as well as increases in foreclosures and underwater mortgages, Zillow revised its forecast for when U.S. home values will bottom out. The real estate tracking service now expects home values won't begin to recover until 2012 -- at the earliest -- instead of later this year.
"Home value declines are currently equal to those we experienced during the darkest days of the housing recession. With accelerating declines during the first quarter, it is unreasonable to expect home values to return to stability by the end of 2011," said Zillow chief economist Stan Humphries in a statement. "We did expect substantial payback from the homebuyer tax credits, which buoyed the housing market last year, but underlying demand post-tax credit, as well as rising foreclosures and high negative equity rates, make it almost certain that we won't see a bottom in home values until 2012 or later."
This means prospective home buyers should beware: If they buy now, they stand a good chance of catching a falling knife by the blade, rather than making a smart deal.
During the first quarter, 97% of the 132 markets that Zillow tracks posted quarter-over-quarter declines in home values: Only Fort Myers, Fla., Champaign-Urbana, Ill., and Honolulu, Hawaii, came out ahead, with increases ranging from 0.3% to 2.4%.
Meanwhile, the 25 largest metro areas in the Zillow Home Value Index not only posted an overall 3% decline in home values but also a new high of 28.4% in which all single-family homes found their mortgages underwater, where home owners found they owed more on their mortgage than the market value of their home.
And in the month of March, alone, one out of every 1,000 homes in the U.S. found itself lost to foreclosure.
Comparing the first quarter performance to that of a year ago, the picture is even bleaker, with the Zillow index down 8.2% to $169,600. Since the real estate market hit its peak in June 2006, home values have plummeted 29.5%, according to Zillow.
If prospective home buyers need additional cause to pause, there are at least a half of a dozen reasons why they should seriously question whether to buy a house now, ranging from the idea that the asset is illiquid to the fact that it's far more expensive than renting. And while the unemployment rate is showing signs of falling, the newly employed looking for a home may be better off waiting until next year, when their incomes will reflect a full 12 months of work, and the benefits of deducting points and interest off a loan may them bring more bang for their buck.