MSNBC – Nearly 29% of mortgaged homes underwater

A whopping 28.6 percent of homeowners with mortgages owe more on their loans than their homes could sell for, according to quarterly data released Tuesday by Zillow, a real estate website. That’s up from 26.8 percent in the second quarter. Home values declined only 0.2 percent from the second quarter but were down 4.4 percent year over year. The rising percentage of homes with “negative equity” or “underwater” status is due largely to how long the foreclosure sale process takes rather than home value fluctuations, said Zillow chief economist Stan Humphries. Prior to the “robo-signing” scandal around foreclosures that came to light in 2010, the negative equity rate hovered in the 21 to 23 percent range, but has been in the 26 to 28 range since due to added delays in foreclosure sales. While the rate of foreclosures is dropping, the time required for foreclosures to sell has lengthened. “We’re in uncharted waters,” Humphries said in an interview. “More than one in four homes underwater and about 9 percent unemployment is a recipe for more foreclosures.”

USA Today – Foreclosure backlogs could take decades to clear out

Foreclosure sales are moving so slowly in half the states that at the current pace, it will take more than eight years on average to clear the 2.1 million homes in foreclosure or with seriously delinquent mortgages, new research shows. That’s about twice as long as a year ago in the states where foreclosures go through courts — before the mortgage industry was upended by last fall’s disclosures that court papers in many foreclosure cases were improperly prepared. Since then, new checks have slowed the process. The backlogs suggest that the fallout from the nation’s worst housing-market collapse is likely to weigh on real estate prices in many markets for years to come, and on some markets for longer than on others.

Comment:  According to Census data, a total of 76.428 million owner occupied units existed in the U.S. as of 2009. Of those, 50.3 million currently had a mortgage on their property.

Recently, Core Logic estimated that 22.5% of all homes in the U.S. were underwater and another 5% had near negative equity.  Additionally, JP Morgan has estimated that 27% of all foreclosures are walkaways.

Zillow’s estimates offer another data point on mortgages, suggesting nearly a third of all homes are now underwater.

Category: Foreclosures, Real Estate, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

9 Responses to “29% of Mortgages Are Underwater”

  1. BennyProfane says:

    Actually, if you believe this argument: , it’s quite plausible that 50% of mortgages are underwater, if you assume realtor’s fees and down payments.

    But, really, at this point, who really knows? These arguments are based on a fantasy value for a home, but, since the market is essentially frozen in most of the country outside of distressed cash sales, then, how could a home be appraised correctly? Put it on the market, and, I’ll bet it’s much more underwater than you actually thought. Maybe it’s lying on the bottom, sleeping with the fishes.

  2. Michael Olenick says:

    As a result of the foreclosure freeze the price of houses has gone down? Somebody over there needs to be sent back to Intro. to Econ. – lower supply and constant demand = higher prices. If prices have dipped (a big if), they’d have dropped even more if there was higher supply. That is, if the foreclosure freeze has had any effect it’s to stabilize home values.

    If pricing really has gone down once the banks start foreclosing again (if the banks start foreclosing again might be more accurate), values will really start to plummet. That will trigger a wave of strategic defaults from baby boomers trying to hang onto their liquid savings for retirement, and unwilling to pour it into a house they’ve outgrown, which has the potential for a downward price spiral: home-price Armageddon.

  3. CitizenWhy says:

    What’s wrong with renting? Or is that an heretical statement in the US(GS)A (GS for Goldman Sachs)?

  4. Giovanni says:

    Since when, especially here, did “court papers in many foreclosure cases were improperly prepared” become acceptable spin for glossing over RICO level tax evasion and outright perjury with a side benefit of breaking the chain of title on nearly every home in the US with a mortgage?

    I read this piece after the post BR linked to about social journalism (or whatever you want to call it) titled Confidence Game. One of the points in that piece was right on, namely that without a functioning independent press/media how can the abuses of the few be pointed out, made understandable and actionable to the many? If the internet was around in the heyday of Standard Oil would there have been the political will energized by the public outcry to bust the trust without Ida M. Tarbell’s widely read reporting in McClure’s Magazine?

  5. victor says:

    Conventional wisdom: the recession ended in the summer of 2009. The working stiff thought that only he was a lagging indicator. Now housing too?

  6. Giovanni says:

    I failed to mention fraud in my earlier post. See page 29, third paragraph of “The MERS Mortgage in Massachusetts: Genius, Shell Game, or Invitation to Fraud?” by Rockwell P. Ludden, Esq. of LuddenKramerLaw P.C. here:

    In an examination of 2,000 mortgage related documents in the Essex Southern District Registry of Deeds in Salem, MA, 75% of the assignments were clearly invalid (an additional 9% were questionable) and of those 27% were fraudulent. IOW 20% of the mortgages contained fraudulent assignments. The rest of the paper explains why most of the other mortgages (those without clearly invalid assignments) also have broken chains of title and covers the systemic tax evasion issue.

  7. bear_in_mind says:

    This hammers home the lesson that blowing asset bubbles causes more long-term pain than if we’d just taken our fiscal medicine (from 2000-07) rather than engage in Voodoo Economics. Whatever gains we collectively accrued have been given up in spades.

    Of course, the exception is that unless there’s a sudden sea change in regulatory and law enforcement, the banksters will have gotten away scot-free with all the missing loot.

  8. argh says:

    walk away!

    hand the keys back to the bank. rent a similar home for less than your former mortgage/property tax payments. you will immediately be much better off. and you’ll be sticking it to the banks who will be worse off as they will now have to formally recognize those bad loans on their books.

  9. Finster says:

    From a German point of view it was utterly insane that people went into retirement with mortgages on their home. Distortions of the real cost of credit have created a two decade long lifestyle that was errosive to the nation’s wealth. Home owners using their real estate as ATMs was the last leg on that erroneous path.

    Now the mess is created and needs to be worked through. America has to rebuild capital, increase its savings rate (which is consistently disincentivised by negative real interest rates) and reestablish its middle class. Nothing less than a “post war rebuilding effort” is necessary after two unfinanced wars and the bleeding out of the nation’s capital stock. Currently missing is the big post war ruin and write down of irredeemable debt and a reset to firm ground to start from.

    How to do this in a political climate paralyzed by partisan conflict and cognitive dissonance, I do not know.