Research illuminated by a First American CoreLogic report last month revealed that 23% of Americans with mortgages owe more than their home is worth, deeming them "underwater." 10.7 million homes - or 15 million homeowners - now have negative equity, with another 2.3 million within 5% of becoming negative on their mortgages. This brings the total percentage of homes in danger to a staggering 28%. Nevada, Arizona, Florida, Michigan, and California have suffered the greatest in this market, with underwater rates skyrocketing to as much as 65%.
This report comes in after data last month showed a slight decrease in the number of homes underwater, down to 21% in October from 23% in September. There had been hope that fewer homes would be underwater, and it was believed that this change underlined the stabilization of housing prices that had been occurring between the second and third quarters this year. Even with this evidence, experts remained skeptical about the resurging market, arguing that foreclosures are once again on the rise.
These concerns proved to be well-founded, with the percentage of underwater homes back to the same level as two months ago and an additional million and a half mortgages that have fallen 90 days behind in making payments, a place from which few homeowners attempt to start making payments again, experts say.
There is some cause for optimism, however. Many of these underwater mortgages were created when housing prices were in serious decline, and house prices have been on the rise for two consecutive months. If home prices continue to increase, fewer borrowers will owe more than the value of their home, making them no longer "underwater."
One factor which may have contributed to the lower number of underwater mortgages during October is that many homes already entered foreclosure, thereby excluding them from the gross number which have negative equity. In all likelihood, this had a significant impact on October's deflated statistics especially since November's statistics do not reveal any real positive trend.
Adding to the number of underwater mortgages are the adjustable rate mortgages (ARMs) which convert over the next few months. When this occurs, many homeowners who took out loans at low rates will find themselves unable to make their new, higher payment, sending even more into negative equity.
The National Association of Realtors reports 3.63 million homes are on the market, representing a two or three-month oversupply and accentuating a stagnation which continues in the current real estate market. Of all homes for sale, 21.4% nationally are bank-owned properties, but some communities hit hardest by the recession have upwards of 75% of the homes on the market as properties which are bank-owned. The positive news is that foreclosed properties appear to be selling more quickly than previously expected in certain parts of the country.
With so many homes in foreclosure and additional homeowners owing more than their house is worth, there remains concern over the recovery of the real estate market. However, with home prices on the rise and limited stagnation in buying and selling foreclosed properties, homeowners can be hopeful that the recovery is on its way.
Locally, Massachusetts has shown an impressive increase in home sales recently, which could ease the minds of some looking to buy or sell a home in the area. Compared with the same time last year, October 2009 saw a 17.9% increase in single-family home sales. Though home prices were down 2.3% for the past year, the significant increase in sales activity shows improvement in the area, perhaps before the rest of the country.
