Number of Deeply Underwater Mortgages Drops in December

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One of the greatest challenges to home owners since the start of the recession and collapse of the real estate market is that the value of millions of homes dropped below the amount of the mortgages on those homes. Owners were trapped in the dilemma of owning a house they could not sell, and which might never be worth more than the bank loan they took out to buy it. The problem caused gridlock in home sales, and many owners left their homes entirely as banks collected more and more unoccupied properties. Now, that problem has improved, at least by a modest amount.

Research firm RealtyTrac released:

… its U.S. Home Equity & Underwater Report for December 2013, which shows that 9.3 million U.S. residential properties were deeply underwater — where the combined loan amount secured by the property is at least 25 percent higher than the property’s estimated market value — representing 19 percent of all properties with a mortgage in December.

That was down from 10.7 million residential properties deeply underwater in September 2013, representing 23 percent of all properties with a mortgage, and down from 10.9 million properties deeply underwater in January 2013, representing 26 percent of all properties with a mortgage. The recent peak in negative equity was May 2012, when 12.8 million U.S. residential properties were deeply underwater, representing 29 percent of all properties with a mortgage.

The news for homeowners was not uniformly good across the country. The regions most badly hurt by the cratering of house prices have been, for the most part, the regions that have recovered the least. According to RealtyTrac:

States with the highest percentage of residential properties deeply underwater in December were Nevada (38 percent), Florida (34 percent), Illinois (32 percent), Michigan (31 percent), Missouri (28 percent), and Ohio (28 percent).

Major metropolitan statistical areas with the highest percentage of residential properties deeply underwater in December were Las Vegas (41 percent), Orlando, Fla., (36 percent), Detroit (35 percent), Tampa, Fla., (35 percent), Miami (33 percent), and Chicago (33 percent).

In particular, Florida, Nevada and Michigan remain sinkholes for real estate values. The numbers are bad enough that they illustrate how some markets may take years to recover, at least in terms of the ratio of home value to mortgage value.

The news about mortgage values, foreclosures and home prices continues to get better most months, at least for most regions.

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