Source: Bianco Research


Presented without comment:

Dr. Housing Bubble – The politics of the underwater homeowner – the impact of negative equity on the balance sheet of Americans. Top 5 markets to purchase foreclosures:

A recent report shows that 1 out of 3 Americans with a mortgage is still underwater owing $1.2 trillion more on their home than it is currently worth. Keep in mind that the 5 to 6 percent cost of selling a home is shouldered by the seller and that isn’t reflected here. In spite of this, most underwater homeowners continue to pay their mortgage dutifully. Even in Las Vegas where 71 percent of homeowners are underwater, many by twice the current home value, only 14 percent are 90+ days delinquent. With so many homeowners underwater what implications will this have on the 2012 election?

Category: Real Estate

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.

24 Responses to “Underwater Homes”

  1. Bob A says:

    effect on the election? well, i guess they might vote for Mitt Romney because they think he’s gonna bail them out right?

    but there are more relevant questions.
    how much underwater?
    could they rent equivalent housing for less than they’re paying even though they’re underwater?
    why haven’t they bailed (walk away) yet?
    at what point would they decide to bail ?

  2. BennyProfane says:

    “Keep in mind that the 5 to 6 percent cost of selling a home is shouldered by the seller and that isn’t reflected here.”

    Which, of course, puts maybe millions more technically underwater. And then, there are maybe millions who are barley above water, effectively having no equity in their biggest “investment”.
    Love to see this broken down to primary vs second (or third or fourth) mortgages. How do you like that granite and stainless kitchen now, Mr. and Mrs. America?

  3. Global Eyes says:

    Home Values change, loan values do not. As home prices sag, many question the benefits of home ownerhip. Landlords are enjoying a mini-boom in rental prices as former homeowners revert to earlier housing styles.

  4. carleric says:

    Do homeowners really know or even care that they are underwater? I can understand it if you are forced to sell when unable to make your mortgage payment but I doubt the average homeowner even thinks about it.

  5. NoKidding says:

    “owing $1.2 trillion more on their home than it is currently worth.”

    Where can I get one of those $1.2 trillion HELOCs? That would be sweet!

  6. DSS10 says:

    I’d like to see a chart that show not just the one in three “underwater” home owners (price greater than loan obligation) but house holds that have had equity lost based on current home prices. I know that there are a lot of people with liar loans and low down payments but I think there has been a lot of middle and low middle income earners who have their balance sheets decimated and still are not technically underwater as defined in this chart. From what I have seen in home prices, it seems as if the lower end of the market was the most inflated and took the hardest fall (the income demographics in of the cities in the chart support this with the exception of Chicago (but I could be wrong on that)). If this is true, then we could really see long lasting effects across a broader population with more profound economic impacts on inter-generational transfer of wealth and financial stability in old age for the middle class population.

  7. Greg says:

    Look down the road. How can these people afford to retire even when they are 80 years old?

  8. Fred Pote says:

    My answer to the question is: “probably not much political impact from the underwater housing problem.”
    Reasoning: The prior administration cultivated the conditions leading to the housing upset. The current administration hasn’t come up with any significant solutions, and the challenger hasn’t either.

  9. James Cameron says:

    According to the most recent Zillow data, 40% of Seattle homes are underwater. Of these:

    37.2% underwater 0-20% (15 out of 100 homes)
    26.0% underwater 21%-40% (10)
    15.9% underwater 41%-60% (6)
    8.3% underwater 61%-80% (3)
    4.0% underwater 81%-100% (2)

    and nearly 9% (4 out of 100 homes) are underwater more than double the
    market value of their homes.

    An interactive Zillow map can be found here:

  10. VennData says:

    So the lesson, to not follow the consensus, is that being missed, again?

  11. louis says:

    Paging Mr. Raneri, Paging Mr. Raneri

  12. Robespierre says:

    But CR (or as I think of it: the new NAR) keeps saying that we have reached bottom!

    “With so many homeowners underwater what implications will this have on the 2012 election?”

    My hope is that they vote for Mitt for president and for Dems in congress

  13. ashpelham2 says:

    I can tell you the long term effects: if we allow home prices to fall to where they will, and then allow them to appreciate into the future, if they are going to do so, there will be people paying mortgages farther into their futures than ever before. The ripple effects of this become a tsunami of financial distress. Today’s reverse mortgage is to me one of the most dangerous and endangered at the same time tools that exists. Won’t even be possible to do one probably 15-20 years from now, because so few people will actually own their homes. We are experiencing the downturn of the financial stability and health of the United States, of which the home was always the underpinnings for Americans. We gambled with those foundations, and lost again.

    Of course, there will be some who will weather this. I think that I can keep paying my mortgage for 15 more years, whether it means the house gains value or not, and one day it’s mine. It’s a roof over my head and it’s paid for. I’ll be 50 by that time, and won’t be able to retire just yet, but that’ll be a big part of it.

  14. rktbrkr says:

    The tax break for short sales expires at the end of this year and there hasn’t been any chatter about extending it. How would you like to be hit with an IRS assessment for the amount you come up short on the mortgage, taxed as ordinary income? Thats a lot worse than a damaged credit score from a walkaway foreclosure, only 7 months to go. Wonder if there will be a selling crescendo this year?!

  15. S Brennan says:

    I’d say little…unless the average sucker……Obama voter learns about this:

    “Barney Frank…reveal[ed] unwittingly that Obama during the transition rejected a Bush administration concession to write down mortgages.”

    If we had a “free press” instead of corporate “news media”, Obama would be running for his life…not the Presidency. But we don’t, so Obama, our Wall Street puppet is a shoe in.

  16. cognos says:

    Im skeptical.

    In order for 70% of “homes w. mortgages” to be underwater.

    Don’t these ALL have to be bought in a somewhat narrow period 04-08? AND few to none having large down payments.

    I would think that regular turnover (about 10%/yr), plus accelerated turnover due to foreclosures, plus some large down payments.

    Its HARD for me to see 50-70% I mean… you’ve got 10% or even 15% of people with a 10-20 year old mortgage… right? Then, I would think you’d have at least 10-15% of people having bought in the last 3 years at cheap prices, out of foreclosure, or bought from a foreclosure agent…? I think whoever is doing this data is not removing foreclosures and mortgages that are not being paid.

  17. Futuredome says:

    Yes, it means 70% of homes were at one time underwater, this is hardly new. This was true 15 years ago as well. Hence, this data is poor, very very poorly collected.

  18. CSF says:

    I don’t know about the election, but in order to see how many Americans are “effectively” underwater you need to add the 6% real estate commission and then the 20% downpayment for the next house. Otherwise people can’t downsize or move, unless they become renters. This has implications for job mobility, ergo employment and income.

  19. BennyProfane says:


    It’s simple. Go to Vegas on Zillow, and watch the graphs from ’05 down to today on almost every house. Now, most of those homes were either built or bought from 03 to 06, believe it or not. Remember the mania? Not much has churned since then, except for the unsold foreclosures and a a minimum of short sales. Try Reno, Sacramento, Miami burbs, and Pheonix. Same story.

  20. econimonium says:

    It will have zero impact on the election. No one has much to say about it, do they? Do you think the Republicans are going to offer up a “bail out homeowners” package? Do you think Democrats will either now?

    Also it’s an abstract. You don’t feel this unless you sell and most people just won’t. Not an issue. I have a second home and, technically, it’s under water. Big deal. I can sit on it for 10 years, what do I care? I’ve seen this before and I’ll see it again. I dutifully pay the mortgage and take my tax credit for it (which, btw, knocks me down an entire tax bracket. Thank you Republicans!) and I’m not going to stop because it’s “underwater”. It isn’t. It is if I sell and that’s the way most people think about it.

  21. donna says:

    And yet they are building new houses in Vegas…

  22. Barnnie says:

    Being underwater in a home mortgage tends to make one feel poor, even if not actually the case. The big picture meaning, to me, is this will continue to greatly hamper any recovery in jobs UNLESS we apply “lessons learned” during the S&L debacle of the 80′s……

  23. cthwaites says:

    “…owing $1.2 trillion more on their home than it is currently worth”

    Not as dire as it sounds. Almost any loan is worth more than the underlying collateral. It’s naturally true of any revolving credit card debt…buy an I-pad on your Visa, boom… you owe more than it’s worth. Car, student, home improvement loans are the same. It’s debt servicing ability that counts more.

  24. LauraS says:

    US market still resembles an uncured disease pattern. Obama´s administration is not doing anything to protect your citizens.

    This is no surprise for me, since our Canadian market is doing the same (like in the risky Torontian market ), maybe with less disparities, but on constant pace.

    And today I read newspaper and the situation in Spain also resembles this trend. Let me point out that Spain is currently fighting with huge levels of unemployment and is not going to recover in the next five years. What is expecting US is unknown, but due to the lack of new jobs created and no real plan on how to regulate the housing market, the situation will continue in the current direction before it settles down.