“The housing crash has had a significant impact on local economies for years, leaving many homeowners with negative equity. If you’re unfamiliar with the term, negative equity is when a homeowner owes more on their home than the home’s market value. A new market report from Zillow.com reveals that 28.4 percent of homeowners in the United States were underwater on their house in the first quarter of this year. This is up from 27 percent in the fourth quarter of 2011.
If you’re underwater on your house but you aren’t planning to move then it is easy to just ride out the housing crisis. However, having a house that is worth less than you owe is problematic in certain situations.
For example, military families that are being reassigned may end up being accidental landlords if they don’t have the cash available to bring to closing. Families dealing with a job loss can’t sell a house and rent something cheaper if they are underwater, instead they will have to look at a short sale or face a foreclosure.
The inability to sell for at least what you owe is significantly higher than the national average in many markets. Zillow’s list of the 25 largest metropolitan areas shows five communities where more than half of single-family homes have negative equity, including:
- Phoenix, Arizona – 68.4 percent
- Tampa, Florida – 59.8 percent
- Atlanta, Georgia – 55.7 percent
- Sacramento, California – 51.2 percent
- Riverside, California -50.7 percent
While these numbers are depressing, Zillow’s prediction that the bottom of the market will come in 2012 at the earliest is even more depressing.
According to Zillow’s Chief Economist Dr. Stan Humphries, “We did expect substantial payback from the homebuyer tax credits, which buoyed the housing market last year, but underlying demand post-tax credit, as well as rising foreclosures and high negative equity rates, make it almost certain that we won’t see a bottom in home values until 2012 or later.”
For some, the American dream of owning a home is turning into an American nightmare.”
- Source: Mnn.com
It’s so sad to hear that America has come to this. I just wonder if the geniuses (A.K.A. dumbasses) in Washington and the bank execs realize that the games they’re playing with the housing market amongst other markets is only making things worse.
Generally when the value of something falls in a recession, people who have the cash/credit swoop it up as the deals are incredible. Both Bush and Obama dropped mortgage interest rates to incredible lows. However, it barely made a dent in new home purchases.
Why? Because the banks and the Government screwed around with the system. The Government imposed all sorts of regulations that the banks can’t or are refusing to deal with. Amongst theses changes is lending rules and regulations. In the midst of the hysteria of the housing market collapse, the Government immediately imposed new laws that would prevent people with fair or bad credit from being able to buy a house.
I hate to condone the act of allowing unqualified people to purchase homes, but DAMN! Somebody has to buy them. It does no good when they are sitting empty as a result of a foreclosure.
Here’s the bottom line… If banks are restricted by who they can lend money too, this lessens the number of prospect homeowners which means that even though there are great deals on homes and low interest rates, it will never matter if people can’t get approved for a mortgage.
Based on this one single issue, I see no way of the housing market making a rebound unless of course, the banks wake up and start lending to more unqualified people again.
Again… I’m not condoning it. I’m just diagnosing the problem.
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