Almost one-quarter of homes 'underwater'

08.13.09
By James Conroy

Although there have been signs of economic recovery in recent weeks, the news is not all good as a new report from real estate website Zillow.com finds that almost one-quarter of all single family home loans are underwater.

One of the problems appears to be the rapid fall in home prices over the last year which has 23 percent of homeowners in June owing more on their mortgage than their house is worth. According to the website, home values have declined for 10 straight quarters and are 12.1 percent lower than they were one year ago.

While the reduction in price is of benefit to people looking to buy a home, many of those attempting to sell are finding that they have to take a loss on their property. According to Zillow, 29.2 percent of those who sold their home in June got less for their house than they originally paid for it.

Home sales are also down year-to-year, with June sales falling 23.7 percent. While sales are up slightly (3.8 percent) from May, 29.2 percent of these sales are from foreclosure re-sales.

Stan Humphries, chief economist at Zillow, said that although some have argued that the recession is coming to an end, he doesn't see a light at the tunnel any time soon and expects foreclosures to continue to rise.

"Reports of increasing mortgage defaults signal that foreclosures are likely to increase again and peak in mid-2010," he said. "With increasing unemployment and high rates of negative equity, we have a fertile breeding ground for even more foreclosures, which add to the already-high level of for-sale inventory that needs to be cleared before values begin to rise."

It also seems that fewer people are getting approved for home loans, as the Mortgage Bankers Association announced on Wednesday that their weekly mortgage applications survey for the week ending August 7 had fallen 3.5 percent. This is after a 4.4 percent gain the week before.

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With 23 percent of homes "underwater" many Americans are stressed