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Shad Cloney's Blog

By Shad Cloney | Agent in Petaluma, CA

More Homeowners in a Position to Sell Their Home as Prices Rise and “Underwater” Mortgages Decline

Rising home prices over the past couple of years are reducing the 
number of homeowners who are “underwater” in their mortgage, 
bringing more potential sellers off the sidelines to take advantage of 
the robust housing market. 
That’s good news for hundreds of thousands of homeowners across 
the country, but the trend also provides relief for many frustrated 
buyers who have been fighting over the limited inventory of homes on 
the market.
Being “underwater” or “upside down” on a mortgage means that 
homeowners owe more on their loans than their properties are 
worth – often referred to as having “negative equity.” The result is that 
these homeowners can find it extremely difficult to sell their property, 
especially if they’re trying to buy another home.
Underwater mortgages grew during the recession and the housing 
downturn. According to CoreLogic, which tracks underwater 
mortgages nationwide, more than one out of every four homeowners 
nationwide owed more on their home than it was worth in 2010. 
But that trend is changing quickly, and homeowners who thought they 
were underwater might be surprised to learn they no longer are. 
“The impressive home price gains of 2012 and the beginning of 2013 
have had a big impact on the distribution of residential home equity,” 
said Dr. Mark Fleming, chief economist for CoreLogic. “During the past 
year, 1.7 million borrowers have regained positive equity.”
Dr. Fleming called the decline in underwater mortgages “a virtuous 
circle” in a recent Associated Press article. “The fact that house prices 
have increased so dramatically ... has unlocked a lot of that pent-up 
supply,” he said. 
According to CoreLogic, at the end of March, 19.8 percent of the 
nation’s mortgaged homes were underwater, down from 23.7 percent 
a year earlier and 25 percent during the same period of 2011. 
The improvement has been seen in every region of the country, 
although it varies by location. While some states and cities are doing 
much better than average, others that experienced the strongest price 
increases and sharpest drop-off during the recession have a higher 
percentage of underwater mortgages.
California as a whole is slightly above the national average with 21.3 
percent of homeowners having negative equity. But that’s down sharply 
from 30.5 percent just a year ago. The Bay Area was 22.6 percent in 
the first quarter, while the Sacramento metro area was 25.8 percent, 
although both regions have seen a drop in over the past year. Please call me at 415-328-2158 if you would like to discuss.

Comments

By Timothy M. Garrity,  Wed Sep 18 2013, 09:21
Good to hear, and thanks for sharing.
 
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