Homeowners watch values continue to drop

12.16.08
By Sarah Beldo

The fact that it is referred to as a "market correction" in the real estate industry is not likely to make it any easier to watch your home's value slowly decline. Surely there can be nothing correct about losing so much equity?

Many Americans are in the same boat. In fact, a new report from Zillow.com reveals that homeowners could lose a total of $2 trillion in home value by the end of this year.

In the first three quarters of 2008, values fell by 8.4 percent annually, compared with the same period last year.

And more than 14 percent of homeowners found themselves "underwater" on their home loans by the close of the third quarter - meaning they owed more on their property than its current market value.

"This year marked the acceleration of the market correction, and is likely to end with the eighth consecutive quarter of declines in home values," commented Zillow's Stan Humphries.

It is not a pretty picture if you happened to have purchased your home when the housing bubble was at a peak.

However, if you have not yet fallen into this category of underwater mortgage holders, you may want to see if you have any options for refinancing your home loan, now that rates have fallen significantly.

In fact, the Mortgage Bankers Association recently reported that the number of refinance applications has tripled due to declining interest rates.

But not all of these applications will ultimately be accepted, because several lenders have tightened their standards in recent months, demanding higher credit scores from borrowers than they did in the past.

If you do refinance your home loan, experts say you can predict to pay closing costs of between $2,000 and $2,500.

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Homes are now worth less than they were 2 years ago