Foreclosures Imminent with many Homes in Negative Equity
The US housing market is still in the throes of a crisis. As long as unemployment remains at a high of 10 per cent and people lose jobs thick and fast, defaults on mortgage payments will remain. Hence, foreclosures have become common. There is a section that feels that the housing market is improving. However, the managing partner at AAA Home Rescuers, Mandy Peacock, loves to disagree. Her company modifies mortgages. In fact, Peacock typifies the crisis being faced by homeowners.
She had bought a condo in Las Vegas three years ago at a price of $250,000. She borrowed the entire amount at the interest rate of 12 percent. When the economy hit the trough in 2007, she realized that she was paying more for the condominium whose value had dipped. She is now planning to sell the property at a price of $49,000. Peacock says that she is an optimistic person but she is realistic too.
If one report is anything to go by, then 23 per cent of mortgage holders are in negative equity, which means that they owe more than what their homes are worth. The section, whose homes are “near negative” equity have jumped up to 28 per cent. These are homeowners who do not even have five percent equity in properties they own.
The regional figures are even worse. In Nevada, 65 percent of owners are facing negative equity. In Florida and Arizona, the figure is about 50 per cent. It may be pointed out that economic recovery can happen only when the housing market stabilizes. Some people are of the belief that the market is showing signs of recovery. For instance, according to a Seattle firm, Zillow.com, the percentage of single homes that are in negative equity has come down two percentage points to 21 percent from 23 percent in the second quarter.
An economist at IHS Global Insight, Patrick Newport, says that unless the foreclosure problem ebbs out, there is no way that the housing market will bounce back on the recovery track. He says that there may not be any recovery till the next two years. A University of Arizona professor, Brent White is of the opinion that foreclosures would increase further once people get rid of the disgrace attached to defaulting and give up possession of their negative equity homes. Even government programs like Making Homes Affordable have not had much of an impact.
[...] If one report is anything to go by, then 23 per cent of mortgage holders are in negative equity, which means that they owe more than what their homes are worth. The section, whose homes are “near negative” equity have jumped up to 28 per cent. These are homeowners who do not even have five percent equity in properties they own. –more [...]