Tag Archives: Negative equity

Zillow’s Negative Equity Report Shows Millions Underwater

20 May

The number of underwater borrowers continues to fall, but that was about the only good news Zillow [1] had to report in its latest look at negative equity.

The company released Tuesday its Negative Equity Report [2] for the first quarter, revealing an estimated 9.7 million homeowners continue to owe more on their mortgage than their home is worth. That number, down from about 9.8 million in Q4 2013, represents about 18.8 percent of mortgage-paying Americans, according to Zillow.

Conservative estimates from the company call for a negative equity rate of 17 percent by this time next year as home value growth moderates.

While the continuing downward trend in underwater rates is a welcome sign of improvement in the housing sector, the company notes that the “effective” negative equity rate, which includes homeowners with 20 percent or less equity in their homes, remains elevated at more than one in three.

“The unfortunate reality is that housing markets look to be swimming with underwater borrowers for years to come,” said Zillow’s chief economist, Dr. Stan Humphries.

With so many borrowers lacking enough equity to comfortably sell their homes and afford a down payment on a new one, Humphries expects inventory to remain choked, driving home values higher and making affordability a greater concern.

What’s more, Zillow found that homes priced in the bottom third of home values nationwide have a greater negative equity rate, with 30.2 percent of that population currently underwater compared to 18.1 percent of those in the middle tier and just 10.7 percent in the top tier.

For those underwater borrowers who happen to be in the lower tier of home values, listing their home will remain difficult without engaging in a short sale or bringing cash to the closing table—another contributor to the supply shortage and a major obstacle for buyers in search of starter homes.

“It’s hard to overstate just how much of a drag on the housing market negative equity really is, especially at the lower end of the market, which represents those homes typically most affordable for first-time buyers,” Humphries said.


foreclosurefrom DSNews.com: http://dsnews.com

URL to article: http://dsnews.com/9-7-million-homeowners-underwater/

4 million homeowners climb out of negative equity

17 Mar

 from latimes.org 3/16/14

WASHINGTON — The economy may be growing at a frustratingly slow pace, but one piece of it is booming: American homeowners’ equity holdings — the market value of their houses minus their mortgage debts — soared by nearly $2.1 trillion last year to $10 trillion.

Big numbers, you say, and hard to grasp. But look at it this way: Thanks to rising prices and equity levels, about 4 million owners around the country last year were able to climb out of the financial tar pit of the housing bust — negative equity.

Negative equity gums up people’s lives and the real estate marketplace as a whole. It makes it difficult or impossible for many owners to refinance out of a higher-cost mortgage into a more affordable one. It makes it painful to sell — you’ve got to bring cash to the table to pay off what you still owe to the bank. Plus almost no one wants to lend you money, at least not at reasonable interest rates secured by your real estate, when you’re deeply underwater. So you’re likely to spend less and invest less, and you’re probably not going to buy another house. Nor will potential new buyers be able to purchase yours.

So when 4 million owners manage to transition out of negative equity into positive territory, that’s significant news not just for them personally, but for the economy overall.

Two statistical studies released this month offered a glimpse of where the country is in terms of homeowner equity, seven years after real estate began to tumble and crash. The first was the Federal Reserve’s quarterly “flow of funds” report. Among many other segments of the economy it toted up, the Fed found that homeowner equity has rebounded to its highest level in eight years — though it’s still not quite back to the $12 trillion it was during the hyperinflationary high point of the housing boom in 2005.

The second study, from real estate analytics firm CoreLogic, focused on the flip side — the impressive shrinkage of negative equity. According to researchers, nearly 43 million owners with mortgage debt have positive equity. Roughly 6.5 million owners are still in negative equity positions, however, down from more than 10 million a year ago and 12 million in 2009.

Who are they and where are they? Not surprisingly, they are heavily concentrated in areas that saw the wildest price run-ups, the heaviest use of toxic loan products and the steepest plunges during the crash. In Nevada, 30.4% of all owners with mortgages are underwater. In Florida, the percentage is 28.1%, and in Arizona, it’s 21.5%. Still, all three areas have improved sharply over the last two years.

Although non-costal California markets suffered some of the most dramatic declines in property values during the bust, researchers found that the state as a whole is nowhere near the top of the latest negative equity list. With 12.6% of mortgaged homes underwater, California has a lower overall negative rate than the national average (13.3%), and has relatively fewer underwater homes than Maryland (ranked 10th worst in the country with a negative equity rate of 16.2%), Ohio (19%), Illinois (18.7%), Rhode Island (18.3%) and Michigan (18%).

Among the best markets if you’re measuring for positive equity: Texas, where just 3.9% of owners are in negative positions, Alaska (4.2%), New York (6.3%), Oklahoma (6.4%) and the District of Columbia (6.5%.) Higher-priced houses generally have lower rates of negative equity compared with houses in lower-priced areas, many of which saw construction booms for entry-level, low- and moderate-cost homes in the suburbs of major cities during the boom years. Just 8% of mortgaged homes worth more than $200,000 have negative equity, compared with 19% of homes under $200,000.

Having positive equity is one thing, but do you have adequate equity? Or are you, as CoreLogic refers to the phenomenon, “under-equitied”? Researchers define under-equity as mortgage debt that is in excess of 80% of your home’s resale value.

This is important in practical terms, they say, because having less than 20% equity makes it more difficult for you to pursue potentially helpful financial options, such as refinancing your primary home loan or obtaining an equity credit line. About 21% of all mortgaged homes nationwide are currently in this situation, and 1.6 million owners have less than 5% equity.

kenharney@earthlink.net

Distributed by Washington Post Writers Group

Copyright © 2014, Los Angeles Times

The Effect of Negative Equity on Current Loans

12 Sep

Nationwide, eighteen percent of mortgages are underwater.   Statistics also show that a home with negative equity is more likely to go into default.  For loans that had an LTV greater than 150 percent, 4.4 percent went from being current to delinquent, while for loans with an LTV of 110-120 percent, 2.2 percent became new problem loans.

The delinquency rate for July was 7.03 percent, a yearly drop of 11 percent and a 30 percent decline from the January 2010 peak.  This is a positive trend in an overall negative climate.

Home prices, home sales increasing

18 Jul
A percent sign.

A percent sign. (Photo credit: Wikipedia)

Inventory of homes for sale is low… this makes sense if you think about a home with negative equity: homeowners cannot list their property for sale.  This lower inventory is having a positive effect on home prices, supply is low, demand is high.  There is interest especially in lower-value properties for investment.

CoreLogic reports that  lower-priced homes are appreciating most quickly.  Since last year, homes priced 125 percent or more higher than the national average improved by 1.8 percent, with homes priced at 75% of the national average appreciating 5.7%.

Lender Processing Services (LPS) home price index shows a 2.5% increase this year, the greatest increase since 2005.