CoreLogic (a housing data firm) reported Monday that the number of underwater homes (homes which are worth less than their mortgage balance) fell this summer for the third consecutive quarter. This is actually a mixed bag of news, both good and bad.
Unfortunately, the main reason less homes are underwater is due to them being foreclosed upon, not because of home values increasing. Currently about 10.8 million homes (22.5%) are underwater. That is down from 23%, or 11 million, last quarter.
A healthy market will have about 5% in this position, so we have a ways to go. The good news is that we are getting there! Interestingly, California is not the highest in this negative equity condition. Nevada leads with 2/3, followed by Arizona, Florida, Michigan, then California.
The states showing the largest decline in homes with negative equity (underwater) were Nevada, Arizona, California, and Florida. Again, the major reason is the high rate of foreclosures. Oklahoma has the fewest homes in this category with 6%. Only nine states report less than 10%.
Source: Sacramento Bee ð
Our take? While we never like to see folks loose their home, the market is beginning to correct itself. This does not mean that prices are going back to what they were 3 years ago. NO! And that is a good thing. People working in an area must be able to afford housing in that same area. When that balance is lost, things like the recent crash are inevitable.
As the market corrects itself, employment increases, consumer confidence increases, employment increases, consumer … the cycle repeats. At this stage the local economy is healing, reaching the point of being able to sustain itself. We all prosper.
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