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Negative Equity Increasing

Last Week, CoreLogic released their Negative Equity Report for the fourth quarter of 2011. The report delivered some important news. Let’s go over the key findings in the report.

What Is Negative Equity?

When a home’s current value is less than the existing mortgage on that home, the house is said to be in a ‘negative equity’ situation (other terms used to describe this situation are ‘underwater’ and ‘upside down’).

How Many Homes Are in a Negative Equity Situation?

The CoreLogic report stated:

“11.1 million, or 22.8 percent, of all residential properties with a mortgage were in negative equity at the end of the fourth quarter of 2011. This is up from 10.7 million properties, 22.1 percent, in the third quarter of 2011.”

This is important because studies show that people in a negative equity situation are more likely to default on their mortgage payments than people who have equity in their homes.

How Many Homes Are Approaching Negative Equity?

According to the report:

“An additional 2.5 million borrowers had less than five percent equity, referred to as near-negative equity, in the fourth quarter.”

Many experts believe that housing prices will soften in the first half of 2012. That will cause a percentage of these homes to fall ‘underwater’.

Bottom Line

History has shown that a percentage of those 2 million+ homes will enter the distressed property category as some families decide it no longer makes sense to pay their mortgage. Any increase in short sales or foreclosures will impact prices in an area.


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5 replies
  1. Mb2145
    Mb2145 says:

    We bought our home in 2006, buying much less house than ‘they’ said we could afford. We financed 80% with a conventional, 30-year fixed loan, and 10% with a 10-year second.

    When we tried to refinance last month, our appraisal came in 20% below what we paid, and 6% below what we owe. Factors included a high rate of foreclosures in our area, likely from those who bought as much as they could qualify for with the ‘creative financing’ that helped drive up prices.

    We can pay our bills, but can’t refinance. We won’t walk away. 

    Reply
  2. Andee227
    Andee227 says:

    Yes, this is true. I see most of my clients going in that direction and they have lost faith in the housing market and the people who got rich by cheating all of us.  And now you cannot even trust the media of what they report because  what they say may cost them their jobs. 

    Reply

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