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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Michael, Was nice to be able to chat with you last night at the chamber holiday event. I wrote down the name of this blog-site you publish and I’m impressed. I’ve considered creating a blog but when I look at the work, energy, and commitment involved I suddenly lose interest. I’m impressed what you are doing and it’s a fresh approach to some serious issues we all face when dealing with the fickleness of the real estate marketplace.
Best,
Chuck
Thank you Chuck. Your words of encouragement are appreciated.
Yes, the market has been difficult to forecast with any accuracy lately. It is our belief that, as painful as it is, the healing process has begun. If you read back over some of the older posts you can actually see this process happening.
I will endeavor to keep the posts here current and relevant to our local market. And it will always be news about the market; NOT A SALES PITCH!
Please tell your family, friends, and business acquaintances. Your recommendation is the highest praise I could receive. And I welcome comments, discussions, and even criticism if suitable for our readership.
Michael McFarlane
In one of your posts you mention the word, “affordability”. Since I believe that success is really finding a solution based on numbers I’ve taken the liberty to do some math on what it should take to afford a home at a sales price of $200K. This seems to be the most obvious # I see on Realtor.Com for this area for a house that can accomodate a small family.
Sales Price = $200,000
20% Down = 40,000
Loan = 160,000
Closing = 2,500
Loan + Close = 162,500
5% @ 30 Yrs = 872.34 monthly pmt
Prop Tx @1.25%= 208.33 Monthly
Homeowners Ins. 75.00 Monthly
Utilities Est 200.00 Monthly
Ttl Shelter = 1,355.00 Monthly
@30% of income to make the $1,355. shelter cost this buyer needs $4,516 of income per month, which is $54,200 per year.
The next step would be to identify which jobs in this area pay those numbers, and whether those jobs are increasing or decreasing and at what rate to determine where the market will end up. And that’s one person’s opinion on the subject.
Chuck