Far fewer mortgage borrowers ‘deeply underwater’

A growing number of mortgage borrowers are keeping their heads above water, according to a report from RealtyTrac.

The company reported Thursday that 9.3 million properties, or 19% of all homes with mortgages, were “deeply underwater” in December, meaning borrowers owed at least 25% more on their mortgage than the home was worth. That’s down significantly from 26% of all homes with mortgages, or 10.9 million properties, last January, RealtyTrac reported.

A recovery in home prices has certainly helped to turn around the fortunes of many homeowners. The averageU.S. home price jumped nearly 14% year-over-year through October (the latest data available), according to the S&P/Case-Shiller home price index. That has added thousands of dollars to the average home’s value.

An increase in home equity typically means fewer foreclosures, said Daren Blomquist, a spokesman for RealtyTrac. “Negative equity is the foundation that foreclosures are built on, but you need another event — a job loss or illness, for example — to trigger a foreclosure,” said Blomquist.

The more deeply underwater borrowers are, the more likely they are to conclude that it makes little sense to continue to pay off their loans when money is tight. “It takes away their motivation to save their properties,” said Blomquist.

They also have one less financial asset to tap into should they hit a financial rough patch.

And it makes it harder to sell the home. Borrowers typically have to do a “short sale,” which is subject to the approval of their lender. If they can’t get a short sale approved, they could end up in foreclosure.

Even though far fewer people are underwater on their homes than last year, it doesn’t mean the foreclosure crisis is completely over.

“There are still millions of homeowners who are in such a deep hole that it will take years for them to regain their equity,” Blomquist said. “The longer these homeowners remain in a negative equity position, the more likely that foreclosure will become the path of least resistance for them.”

The states with the highest percentage of deeply underwater homes in December were Nevada with 38%, Florida (34%), Illinois (32%), and Michigan (31%). Metro areas where borrowers are still struggling to get above water include Las Vegas (41%), Orlando, Fla., (36%), Detroit (35%), Tampa, Fla., (35%), Miami (33%), and Chicago (33%).

On the other end of the spectrum, the number of equity-rich homeowners — those with at least 50% equity in their homes — grew significantly by the end of 2013. Blomquist said the number of equity-rich homes rose to 9.1 million, or 18% of all mortgaged homes, in the last quarter of 2013 compared with 7.4 million, or 16% of homes, three months earlier.

In Hawaii, 36% or mortgage borrowers were in this equity-rich position. New York, California, Montana, and Maine also claimed a high percentages of these borrowers. To top of page


About thenoelteam

As a Broker with RE/MAX Alliance, I work energetically for my clients whether they are a buyer or seller. I help you achieve your goal of owning a home or getting the best price for your home in the shortest time possible. After graduating from UCLA with a degree in communications and finance, I was licensed in 1977 and since then I have sold over 3600 properties amounting to over $1 billion in sales. I currently rank in the top 10 in home sales for Colorado. I offer the same quality of service and superior communication to all clients, ranging from starter homes to multi-million dollar estates, commercial and income properties, relocations and foreclosures My goal is to provide you with the best representation possible whether you are buying or selling. Over the years, one of the things that I've discovered is that there is a difference in the way individual Realtors do business. For me, I have always felt that honesty and personal integrity are the foundations upon which a successful business and career are built and sustained. I have an extensive background and knowledge base in real estate, including financing, which has enabled me to provide outstanding, quality advice and service not found with many agents today. My commitment to communication creates a positive relationship between my client and myself that results in a successful property sale or purchase. My passion for real estate, commitment to my clients and personal integrity has helped me to achieve success placing me in the top 1% of all brokers in nationwide. In my career, I have earned a number of awards and received considerable recognition for my success but the most significant recognition comes from the fact that over 75% of my business comes from past clients. My success is a true measure of my client satisfaction.
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