Fewer home mortgages are under water as values stabilize
Filed under: Economy, Investing
The percentage of Americans owning homes that are under water is falling, according to Zillow's third-quarter Real Estate Market Reports, which focus on 156 metropolitan areas. The other good news is that home values were relatively flat between the second and third quarters, so the price declines may be over for most homeowners.
Zillow found that 21% of homeowners with single-family homes were underwater on their mortgages at the end of the third quarter, down from 23% in the previous quarter. Two factors play into the drop. One is that many under water homeowners have already lost their homes to foreclosure. The second is that home values have stabilized in some areas of country and have even started going back up in other areas.
Home values fell 6.9 percent year-over-year to $190,400, according to the Zillow Home Value Index, but home values remained relatively flat from the second quarter to the third quarter. The Zillow Home Value Index measures the value of all homes, not just those sold in a particular period.
Zillow found that home values increased in 24 of the 156 metropolitan areas it tracks and remained flat in an additional 16. But 116 of the metropolitan areas showed year-over-year declines in the third quarter.
Cash Is King
About one-fifth of all sales in September were foreclosure resales. That's up from 14.7 percent a year ago. Merced, Calif., had the highest rate of foreclosure resales at 74.2%, but this area has been near the top of this list for more than a year. Clearly, investors see this as a good opportunity for future profits as the area stabilizes. Other areas where foreclosure homes are being bought up at a rapid pace include Stockton, Madera, El Centro, all in California, and Las Vegas.
I live in one of the hard-hit areas in Central Florida. I've heard from people who want to buy a foreclosure or short-sale home that they're having difficulty getting a contract. They're finding they must compete with investors who have cash. And right now, cash is king. Anyone wanting to sell would prefer not to wait around for a mortgage to be approved (or worse, denied).
I've also heard complaints from real estate professionals handling home sales in Central Florida that appraisals are coming in so low they can't keep a contract together. This makes home sales dependent on the buyer getting a mortgage even riskier. But if the buyer is offering a cash deal, sellers often take it even if a contract comes in at a lower price. Are you seeing similar situations were you live?
Lita Epstein has written more than 25 books, including The 250 Questions You Should Ask About Buying Foreclosures.
Why is Oprah going to cable? A hint: It's nothing to get teary about
Kisses from Hershey: Candymaker may court Cadbury with $17 billion bid
D-Day for Harry Reid: Can he wrangle 60 votes for Senate health reform bill?
Reader Comments (Page 1 of 3)
11-09-2009 @ 10:35AM
Marc said...
Your article is premature. We haven't seen anything yet. Commerical is imploding now. Banks are holding onto 700,000 properties they can't dump. 1st quarter next year is when the US will implode.
Reply
11-09-2009 @ 5:00PM
Shadow Inventory said...
I agree Marc. The feds are paying banks to hold a shadow inventory and buying up toxics. At some point, home prices must become affordable, especially when credit is dead and unemployment is double digit. Basic necessities (especially fuel costs of transporting goods) is inflating; less disposable income. Commercial real estate is on the skids; retailers are shutting down. This will be worse after Christmas. We haven't felt the worst of this yet. This one is not a few months, it will be years.
11-09-2009 @ 5:15PM
mickey said...
Zillow is full of it. Their calculation methods are crap and their valuation method is screwball. There is a piece of junk house behind me that's been a rental and deteriorated for years, on a busy street with lots of noise and fast traffic and its priced at $135 a square foot, the house next on either side is $100 a square foot and mine is $90 a square foot. All three of the surrounding houses are well kept, mine included yet Zillow seems to be arbitrarily punching in numbers. Don't trust Zillow.
11-09-2009 @ 10:50AM
Jerry said...
I have spoken to a couple of people I know well in real estate in Atlanta, Orlando and Alabama and they don`t necessarity agree.
Reply
11-09-2009 @ 11:15AM
07 Shelby said...
I disagree with this article. I deal with real estate as an investor and agents are telling me that the bottom hasn't hit yet. I see new construction where builders are reducing prices on houses as much as 100K just to get them out of inventory. Granted, they are 800K homes but it is enough to keep me from buying just in case the agents are right. Also in the last 6 months, my own home has taken a 40K loss on a more moderate 300K house. At this point I am ready to dump all my real estate so as it crashes further, I will be in a better position to deal on my purchase. Right now, real estate is a losing propostion no matter what the talking heads have to say! Results speak more than theoretical hype! Wait until the massive layoffs next year from GM and Chrysler and then ask what the foreclosure rate is. With them laying off between 300K-400K just from their dealership closings, many more in those communities will lose their jobs. Not to mention the fact that 7 Million mortgages re-set in 2010. Then there is the commercial real estate that will make more banks close up. Not good indicators for a better real estate market in the near future!!!!
Reply
11-09-2009 @ 11:27AM
Bob said...
Someone must be paying Zillow off to say that prices are going up. I checked my home and it is at 1999 levels which means that my home has not appreciated 1 thin dime in 10 years. No one can sell their home in my entire town of 100,000. Prices in some areas are still absurd. A downtown condo - 2 bedroom with hard wood floors, cheap stainless steel appliances and a nice bathroom is not worth $700,000 in any economy. And one has to remember that only about 20% of home owners caused this bubble but it affected all of us.
Reply
11-09-2009 @ 11:35AM
bob said...
Where do you live?
11-09-2009 @ 12:52PM
tom said...
From the 1960's through the 1980's home prices barely budged. What have you been expecting? I have real estate that has gone up since I bought it.
11-09-2009 @ 11:57AM
rocky said...
this artical is about as false as our goverment is !! you could not before and you cannot now take anything from zillow to heart it is an exploded value just like the rest of these so called sites suck as AVM MODELS the banks use to use when they wanted to refi your house and sink you further into debt !! you want the real value of your home look what sold in your neighborhood then you will no what your home is worth i am in business and i can tell you just in my area in florida a home thats 300 sq feet bigger then mine with a pool on twice the land just sold for $132,000 and yet zillow has my home worth $205,000 and that could never happen !!!!! when my comp is the $132,000
Reply
11-09-2009 @ 3:54PM
kdnorcutt said...
Rocky
You are right on hoe to value your home. When appraisals are done for mortgage lenders. they have to use like homes that have sold and gone to settlement in the last 6 months .they want 3 sometimes 4 comps.
11-09-2009 @ 5:49PM
Comp Scams said...
don't be surprised if they pull another savings and loan scam by creating their own comps to artificially jack up prices. In the savings and loan scam, they sold land with construction loans to insiders then used insider sales comps to jack up loan values: Developer/S&L collects on inflated land values and construction loans, never builds, defaults and absconds with the cash. Miliken spent about 6 months golfing at club fed for this but was allowed to keep the money he stole; $billions.
11-09-2009 @ 12:30PM
Sherry said...
Banks are holding onto the foreclosed homes, they are not releasing them. I have cash and want to buy, but the inventory is low. The banks are holding over 2,000 homes in my area
Reply
11-09-2009 @ 12:59PM
DUKE said...
YOU ARE CORRECT.SHADOW INVENTORIES ARE HUGE.DIDNT A GLUT OF INVESTORS CREATE THE FIRST BUBBLE.ALSO BUYERS ARE PUTTING IN MULTIPLE OFFERS WHICH CREATES SUEDO INTEREST.
11-09-2009 @ 12:05PM
hotrodqd said...
100k is alot to pay for a home .....must be all that expensive illegal alien laborers wages being shelled out inflating prices ? I wont ever be suckered into a loan again ....I will pay cash or go without.....using credit scores against consumers is similar to extortion only its legal for these loan sharks to do so !!! and as far as I'm concerned when you get the loan you are buying on time .....and therefore all interest is already added into your payment plan .....whether behind or late on monthly payments should be null or void of any late fees etc......when they day comes for total repayment (your last scheduled payment for title etc) and it still has a balance then late fees or foreclosure reposession should occur ....what say you ?
Reply
11-09-2009 @ 12:14PM
hotrodqd said...
the war is in america.......its the people vs the lawmakers-the healthcare industry-insurance comps and the preditor lenders !!!! we need to start fighting back and rid our great country of these professional thieves hiding behind un ethical practices -govt protection and sucking people dry & throwing people out on the streets literally .....its our duty to make this country a better place for our children ....not let this evil suck everything out of consumers including theyre future educational or retirement funds dry !
Reply
11-09-2009 @ 5:05PM
BOB PRESTWOOD said...
YOU ARE RIGHT....WAKE UP AMERICA!
11-09-2009 @ 12:21PM
sam said...
It depends on how you look at it. (Glass half full) If you believe that it is going up, and you keep working at it hard, then you will progress.
Reply
11-09-2009 @ 1:00PM
hotrodqd said...
why is their no organization set up or designed to help consumers....car buyers -home buyers etc.....to give them emergency aid to allow them get funds to avoid reposessions or foreclosures ? consolidating doesnt always work properly .....we need a govt program that provides this service ....or one that can be trusted ...not to take your money and allow the creditors to still take items in question !!! ooops thats right ...only the wealthy & wall streeters get bailed out or protected by the usa govt .....while consumers are left too starve or die in the streets !!! while creditors not only get to keep monies collected -down payments etc and also the property back to resell !!!
Reply
11-09-2009 @ 1:04PM
Marc said...
Furthermore, a recent article stated 17.5 million mortgages are underwater. This is about 35% of all outstanding mortgages and that in one more year could reach 25 million mortgages or about 50% of all outstanding mortgages and then will go higher. Fannie Mae and Freddie Mac are now renting back homes to the foreclosed on. So, those numbers won't count. Quite clever! You would be a fool to purchase anything right now.
Reply
11-09-2009 @ 1:04PM
hotrodqd said...
its satans world ...when money and greed trump all !!! ...psssst you wont see me when you die .....I'll be in the company of the glorious......as you fry in hell amen
Reply