Underwater - or upside down - home ownership got worse as the past year wound down. First American CoreLogic published a new research paper on the issue stating that over 11.3 million homes were upside down at the end of 2009, meaning that 24% of all residential real estate with mortgages was carrying that unwelcome label. At the end of the third quarter of 2009 there were 10.7 million houses underwater, so in three months about 600,000 additional properties got whacked.
To stay with the statistics, First American CoreLogic further reports that 2.3 million more homes were heading towards the famous freezing submergence, these being units that had less than 5% equity cushion at year's end. Put together with those already underwater, the picture becomes increasingly bleak, because it now translates to roughly 29% of all mortgages holding that classification.
Nevada continues to top the list of states with the most underwater mortgages, coming in at 70%. Las Vegas area - with communities of Mountains Edge, Summerlin, Anthem, Henderson, Canyon Gate and Rhodes Ranch - predictably hoards the majority of those on account of being the population center.
Underwater mortgage in itself is a serious problem. The homeowner is trapped. He can't sell the property unless he brings hard-earned money to the table to close a deal. He can't refinance either, for the same reason. Generally, no one will do that. This effectively removes a large segment of current mortgage borrowers from the real estate market, putting a sizable dent on the demand side.
Secondly, upside down homeowners are more liable to default on their mortgages. The more they are in negative equity, the more likely it is that they'll lose the property, be it a short sale, foreclosure or deed in lieu. As their FICO scores get dinged badly, they'll be unable to get mortgage approvals for a few years, dealing another heavy blow to the demand function.
Simply looking at what underwater mortgage can do to demand sends shivers down the spine of policy makers, home loan providers, real estate experts and other interested parties. A major headache indeed. Or worse.
Photo by krossbow
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Provided by:
Esko Kiuru
Mortgage, real estate and apartment industry analyst
www.BluefoxToday.com - syndicated mortgage, housing and property management blog
eskokiuru@gmail.com
My cell: 702-499-1006
70 percent in Nevada, wow that is a huge number of homes underwater. How much of a drop in values have we experienced overall in the past five years in Nevada? Hopefully 2010 will see improvement.
Jeff, that is not a category that you want to be number one on. Hope things turn around this year for you guys.
It is darn right scary what is going on. BPOs are coming in at a VERY healthy pace right now. Got 20-ish in the last 24 hours and I am not THAT big of a BPO agent. I only produce between 100-150 a month.
MaryBeth,
Value drops vary by neighborhood, but it can go up to about 60%.
George,
We need a serious push from somewhere to get this real estate nightmare sorted out.
Renee,
That's a truckload you are dealing with.
They were all due by 3 today. I can barely see straight, LOL
Esko We are nowhere close you in percentages, but it is a nightmare regardless of the percentages throughout the country
Renee,
Hang in there.
Karen,
Nightmare is a good word to describe what the housing market looks like.