Rebounding home prices are lowering the number of properties who are considered “underwater” on their mortgage. According to real estate industry analysts more than 700,000 homes across the country are no longer underwater, owing more on their mortgage than the home is worth.
At the end of March, 23.7 percent, or 11.4 million, of home owners with mortgages were considered underwater on their mortgage, according to CoreLogic’s latest report. Three months prior, that percentage was 25.2 percent, or 12.1 million home owners.
Underwater home owners, who don’t want to take a loss when selling their homes, are starting to see the price increases and are now waiting to sell. Because of this, inventory of available homes for sale is falling, giving buyers, who have waited until now, fewer options. As demand is increasing the supply is shrinking and putting upward pressure on prices.
At MagnumOne Realty in Roseville our normally brisk flow of short sales has declined and the number of buyers looking for homes has increased. Buyers looking in the Sacramento area for a home in the under $300,000 price range have fewer homes to look at and the ones which show well, get snapped up quickly and often with over asking price offers.
Homeowners with substantial negative equity remain interested in short sales and other alternatives but those who are “slightly” underwater now seem more inclined to wait and see if their home increases in value to a point where they have equity again.
According to the CoreLogic report, about 1.9 million home owners were 5 percent underwater during the first quarter. If prices continue to inch upward, these owners are expected to climb out of underwater territory.
Overall the changes in the Sacramento area housing market have been a positive but unless the economic recovery speeds up, which is unlikely, we will experience a slow down during the second half of the year. On an encouraging note, this time of transition where prices are increasing and the number of underwater homeowners is declining, it is a solid step in reducing the future flow of mortgage defaults and foreclosures.
