In addition, there are 2.3 million mortgages that show less than a 5% equity, so they are well on their way to being underwater, too. These numbers come to us courtesy of a California real estate information company, First American Core Logic. The report goes on to state that because house prices have dropped so significantly, more than 5.3 million property owners owe at least 20% more than the value of their homes. Close to 10% of these homeowners are currently in default on their loans.
What is more disturbing is a new trend among homeowners, employed and unemployed alike: last year more than 588,000 homeowners stopped paying their mortgages. The Wall Street Journal reports that many of them could afford the payments; however, they simply decided it wasn’t worth their while to pay for a home that no longer had sufficient value. This trend could pose a threat to a residential real estate recovery, because it increases the number of homes for sale in a market that already has more than enough inventory.
The largest number of underwater borrowers – more than 40% - are comprised of those who purchased homes between 2005 and 2008 using adjustable rate mortgages (ARMs). But statistics also show that 11% of buyers who bought during 2009 are in debt for more than the value of their homes.
The states with the largest percentages of negative equity homes, according to NPR, are Nevada, with a whopping 65%. Arizona trails with 48%, followed by Florida, Michigan, and California with just between 35 and 45% of borrowers owing more than their homes are worth. In addition, more than 30% of that group of property owners are underwater by more than 50% of the value of their homes.
The Mortgage Bankers Association indicates that close to 7.5 million borrowers are at least 30 days past due in mortgage payments or were in process of foreclosure as of September 30.
Around the nation, the average worth of homes that are encumbered with mortgages of any kind is approximately $270,000. Nationally, the average market value of a home in negative equity is only $210,000, while those negative equity homes typically carry a mortgage debt of approximately $280,000. This translates to a loss in value of close to $70,000.
NPR calculates that the total value of homes at risk of default is approximately $2.2 trillion, while the mortgage debt owed against these homes is approximately $2.9 trillion.
The simple conclusion: with 1 in 4 borrowers in irreversible debt, a mountain of foreclosures may create a large roadblock on the path to real estate recovery…unless banks continue to judiciously parcel out foreclosures to help current home values remain relatively stable.
Written by Marc Jablon, Realty Associates
marcjablon@yahoo.com / 561 / 213 – 6139
www.MarcJablonHomes.com
Posted November 30th, 2009 by Armen Hareyan
