Decrease in Home Values Correlates to Increase of Homeowners Who Are “Underwater”
Zillow.com, a real estate information service, reported that there was an increase in the number of homeowners who are considered to be “underwater” – meaning that they owe more on their mortgages than the value of their homes – as housing values continued to decrease in the first quarter of 2009. This means that approximately 22% of homeowners have mortgage balances that are greater than the value of their homes. It is estimated that an additional 2.2 million borrowers are at risk of falling into this position if housing values decline an additional 5%. At the end of last year, 17.6% of homeowners owed more than their original mortgage, an increase of more than 3%, from 14.3%, three months earlier.
According to the Standard & Poor’s/Case-Shiller Home Price Indices, in March, the prices of U.S. single-family homes decreased almost 20% from a year ago. And, the index of 20 metropolitan areas from February to March fell 2.2% according to S&P.
The increase in the number of homeowners who owe more than the value of their homes could throw a wrench into the Obama administration’s current plans to stabilize the housing market. Under the current plan, guaranteed loans can only be refinanced if the mortgage loan is a maximum of 105% of a home’s value. So, now more than ever, it is important that homeowners know the most accurate value of their homes.
Experts say the estimate of the number of homeowners who are “underwater” could be skewed on the high side for various reasons, such as differences in home-price estimates, and homeowners who are already in the foreclosure process could be counted as owing more than the value of their homes if the title to their property hasn’t changed hands.
Despite this news, there also are some recent indications that the housing market could be beginning to stabilize; the National Association of Realtors pending home-sales index increased 3.2% in March.
By: Present Value