Home Prices Have Smallest Decline in More Than Four Years

The percentage of borrowers with negative equity has shrunk and as a result, U.S. home values have had their smallest decline in more than four years according to Zillow Inc, a website with property-value estimates and real estate listings.

The percent of single-family homeowners who owed more on their mortgages than their houses were worth fell to 26.8 percent in the second quarter, down from 28.4 percent in the first.

Home values fell 0.4 percent from the first quarter, the smallest drop since the first three months of 2007. According to Zillow’s chief economist Stan Humphries, the temporary decline in bank repossessions, caused by court delays and paperwork errors, may be preventing a more significant drag on housing prices.

“We do have a slower volume of foreclosures transitioning into the marketplace now,” Humphries said. “And that is helping the near-term performance of the market -- and at the expense of the longer-term performance.”

In 84 percent of the largest U.S. cities, foreclosure filings have dropped, as attorney generals in all states are investigating allegations of shoddy practices by servicers and lenders.

In almost two- thirds of the 154 metropolitan areas surveyed by Zillow, home values increased in the second quarter. 25 U.S. cities had two consecutive quarters of increases.

“It’s a positive that we’re moving in the right direction,” Humphries said. “But I would caution us about being euphoric about these numbers.”