Nearly A Quarter Of Homes Underwater
March 9th, 2011
According to a report released by CoreLogic yesterday, 23.1 percent of residential properties with a mortgage were underwater at the end of 2010. That is up slightly from 22.5 percent earlier in the year, and represents a 300,000-home increase in just three months[1]. These numbers do not surprise many analysts, but they do worry them since underwater homes are a “drag” on the market because they prevent homeowners from exiting those homes via traditional routes like selling and they also stifle the “trade-up” market in real estate, which consists of homeowners buying better, more expensive homes and selling their old ones.
Mark Fleming, CoreLogic’s chief economist, says that these high levels of negative equity will keep housing and mortgage finance markets sluggish even if the rest of the economy begins to recover. Perhaps of equal concern is that 2.4 million borrowers have “near-negative” equity, meaning that they have less than 5 percent equity in their homes. This could quickly turn negative if CoreLogic predictions that home prices will fall another 5 to 10 percent in the coming year.
In light of this news, many in the Obama administration are protesting Republican proposals to cut HAMP (Home Affordable Modification Program) as part of the budget adjustment even more vehemently. In fact, the White House has threatened to veto attempts to do so, saying that the program is a “cost-effective approach to assisting underwater borrowers”[2]. However, the program, which was intended to help as many as 4 million homeowners, has thus far only helped a few hundred thousand and wasted massive amounts of taxpayer money, say HAMP critics.
For many real estate investors, these types of numbers mean more involvement in the real estate market thanks to creative financing and other alternative methods for buying property. Do you think that this is the way out of this mess?
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[1] http://blogs.wsj.com/developments/2011/03/08/report-more-borrowers-underwater/
[2] http://online.wsj.com/article/BT-CO-20110308-714971.html
March 9th, 2011 at 9:58 AM
One thought always comes to mind in the mortgage mess…why do banks allow homeowners to pay high interest rates and wont “qualify” them for a lower rate loan, or a fixed 30 year? If someone is paying 2800/month on a mortgage does it make any sense other than greed that a bank says”you dont make enough money to qualify for a new loan”. Really? than how do homeowners pay the higher payment? Banks have found every trick in the book to not work with borrowers. the banks have padlocked their doors. People “in the know” just cluck their teeth as they know what we are saying is true. handing them hundreds of millions of dollars of taxpayers money has made them even worse. Look how profitable they are. When someone with any clout truly grasps what they are doing.and wants to actually fix it..or hsa the ability to override the corporate greed, .then we will start to have some solutions.
March 9th, 2011 at 6:32 PM
Well, we have been dancing around the campfire for many months, since no one during the presidential campaigning and Nov voting, would even utter the word recession, much less toxic implosion of the mortgage/housing market sector. To keep further decline in the FMV of SFR properties in default, or approaching default, Mortgage holders must SELL at a discounted PRICE, getting as MUCH as they can, but stopping short of PLUGGING UP the FLOW of homes sold to main street investors, who can consumer the HUGE inventory, if only discounted to the point that a ROI yield is sufficient and the VOLUME of back-logged homes in pre-default, default, and/or foreclosure and/or as REOs are FLUSHED, thus saving further declines in value. THere!! Ive said it!!..:-)