Although the number of homeowners in the country that have negative equity on their mortgages continues to drop, 13 million of them feel tied to their current homes and unable to sell them, according to a new Zillow report. http://www.dsnews.com/articles/zillow-182-of-above-water-borrowe…
Rising home prices help
As current home prices rise, many underwater homeowners’ equity in their homes will rise also which may eventually make it easier for them to afford to sell their homes and produce down payments and closing costs on new ones. This in turn will eventually ease the current home market inventory shortage, the study reported.
The national negativity rate at the end of Q1 this year was 25.4 percent, compared to 27.5 percent at the end of 2012, Zillow said, which represents approximately13 million homeowners with mortgages.
However, when added to the number of mortgages with less than 20 percent equity, the Negative Home Equity Bars Many from Buying New Homes
“effective” figure represents approximately 24.6 million homeowners, which is 43.6 percent of homeowner with mortgages or 22.3 million homeowners.
Can’t sell or buy homes
These figures are important because the homeowners in these two groups are probably not currently in a position to produce a down payment and other costs needed to buy another home, even after their present home was sold. According to Zillow.
“Reaching positive equity, even barely, is an important milestone. But things like real estate agents’ and a down payment for the next home traditionally come out of the proceeds from the prior home’s sale,” said Dr. Stan Humphries, chief Economist for Zillow. “Without enough equity, these costs will instead have to come out of a homeowner’s pocket, leaving many still stuck.”
“Looking at the effective negative equity rate could explain why recent, healthy declines in the number of underwater borrowers haven’t yet translated into more homes for sale.” he added. “The only cure is patience, as rising home values continue to build equity to the point where more homeowners can realistically sell.”