23%+ of Homes Underwater

Editors Note: If anything shows the extent of appraisal fraud, it is the sheer number of homes that are under water. These figures while high, report only a fraction of the actual number of homes because of the way they are computed. If you take the asking price, reduce it by at least 4% (which is the actual sales price), reduce that by 6% (the average real estate brokerage commission) and reduce that by other selling expenses, you’ll end up with a much higher figure.

The divergence between the cost of renting a home and buying a home is a strong indicator of the real fair market value. When you add in the key component of housing values — median income — you can see that we are teetering on another downturn in home values. Those that are underwater are under “house arrest” being unable to sell their homes because they cannot afford to pay off the principal balance demanded from a servicer who has no idea of what is due on the principal because they are not allocating third party payments from credit enhancements and federal bailouts.

Short sales are hard to get although some people, like Edge Simonton in Houston are reporting better results lately. Strategic defaults are on the rise, thus increasing the number of homes that are in the pipeline for sale. The market already over-saturated with homes for sale has a hidden inventory of homes for sale that are not reported.

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Mortgage Holders Owing More Than Homes Are Worth Rise to 23%

By Brian Louis

May 10 (Bloomberg) — More than a fifth of U.S. mortgage holders owed more than their homes were worth in the first quarter as repossessions climbed to a record, according to Zillow.com.

Twenty-three percent of owners of mortgaged homes were underwater during the period, up from 21 percent in the previous three months, the Seattle-based property data provider said today in a report. More than one in 1,000 homes were repossessed by lenders in March, the highest rate in Zillow data dating back to 2000.

Underwater homes are more likely to be lost to foreclosure because their owners have a harder time refinancing or selling when they fall behind on loan payments. U.S. home values dropped 3.8 percent in the first quarter from a year earlier, the 13th straight period of year-over-year declines, Zillow said.

“Having a lot of underwater homeowners will add to the downward pressure on house prices,” said Celia Chen, senior director at Moody’s Economy.com in West Chester, Pennsylvania. “We do expect that home prices will fall a bit more.”

Bank repossessions in the U.S. rose 35 percent in the first quarter from a year earlier to a record 257,944, according to RealtyTrac Inc., an Irvine, California-based company.

Sales of foreclosed properties by banks accounted for more than a fifth of all U.S. home sales in March, Zillow said. They made up 66 percent and 62 percent of transactions, respectively, in the metropolitan areas of Merced and Modesto in California.

About 32 percent of homes sold in the U.S. in March went for less than their sellers paid for them, Zillow said.

The closely held company uses data from public records going back to 1996. Its mortgage figures come from information filed with individual counties.

To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net.

Last Updated: May 10, 2010 04:31 EDT

14 Responses

  1. […] latest numbers I have seen indicate that about 23% of all mortgages are under water. For the reasons mentioned […]

  2. […] latest numbers I have seen indicate that about 23% of all mortgages are under water. For the reasons mentioned […]

  3. […] true for buyers in the peak bubble years 2005-06 when the Option Arm was most popular. The latest numbers I have seen indicate that about 23% of all mortgages are under water. For the reasons mentioned […]

  4. 2 “neidermeyer”

    Al Core just purchased an energy sucking palatial home in CA… is that the type of individual that can lead this country to energy independence?

    Time has come to expose those that pontificate and those that do!

  5. Robin_Hood

    “This problem is spreading like a wildfire…”

    The problem is that real wages have gone down over the last 10 years, until home prices reduce to 25-30% of income the slide will continue ,, and since real estate is generally leveraged up and because real income is continuing to drop we are nowhere near a bottom. The Cap and Trade bill which debate starts on tomorrow 05/12 is a huge tax that will hit everyone hard.

  6. PJ and anyone else that cares to make a difference are all welcome to contact me…

    At this time I am working with the smartest class action firm in the west…

    Eventually we are going to prevail and reclaim our country, but we need help…

    I’d love to put together a cross country group of enlightened homeowners to help us make a stand, sort of Homeowners Crusade…

    We can all help each other and our fellow unenlightened ones.

    See my contact info in the previous post (note the underscores)

    Hope to hear from you!

  7. 2 Robin Hood

    “In my opinion we got a bunch of amateurs in the government, while the Wall st pros are sailing circles around them…
    How pathetic… We now live in Kleptocracy (google it) rather than Democracy… Our founding fathers must be rolling over in their graves…”

    Can not agree more, but amateurs… I think not, they are megalomaniacs with a propensity for Kleptomania interested in solely their own advancement. Anyone with a brain and the courage to tell the truth is shut down and ordered to sit down and shut up by the WS/DC insiders.

    The robbing of the American Taxpayer by the GSE’s, the NYFED along with their shifting executives to and from and at GS, AIG, JPM etal… has the full blessing of the POTUS since it best serves this administrations agenda of “changing” America as we know it. Indeed the founding fathers are rolling over in their graves.

  8. A GOOD CORRUPT JUDGE IS A HOMELESS JUDGE. IT IS TIME TO TAKE THEIR SALARIES THEIR HOMES AND THEIR PENSIONS.

    http://www.cbsnews.com/video/watch/?id=6466447n&tag=contentMain;contentBody

  9. The bigger story is in Las Vegas 85%+ of homes are underwater and I suspect that Phoenix, Modesto area, parts of Florida and Michigan are just as bad or may be a tad bit better…

    This problem is spreading like a wildfire…

    Everyone should of listened to Roubini and Sheila Bair who was talking up “short refi” in the spring of 08.

    Had our government had a brain, in the summer of 08 they could of rewritten all then underwater mortgages at then current value for about $150B. I am not sure that would have stopped the meltdown, but huge proactive real measures move markets.

    This was proven once again today.

    In my opinion we got a bunch of amateurs in the government, while the Wall st pros are sailing circles around them…

    How pathetic… We now live in Kleptocracy (google it) rather than Democracy… Our founding fathers must be rolling over in their graves…

    I’ve long ago said that the summer of 2010 will be the period of revelations (not the Jesus kind)…

    So… here we go…

    P. S. If you need help in Nevada you are welcome to contact me for info and support (I’ve got a growing network in the Battle Born state):

    robin_hoood_09@yahoo.com

  10. Marty,
    I am up against the BoA Constrictor…how did your case turn out? Or how is it turning out?

  11. But the market went up a bundle today – for those that still control you.

  12. Wow! The article mentions the town I live in! I am surrounded by foreclosures here in Modesto, California and my home is next! Unfortunately, the attorneys in this area don’t “get it.”

  13. Those of you up against BOA machine, they are now requiring borrower’s to call their Short Sale dept to initiate a short sale.

    You can sell via a short sale all they way up to the day before the auction.

    Some lenders are beginning to give relocation money up to $3000 as part of the settlement, as well as waiving deficiency judgment.

    If you get tired of the fight or lose in Court, you can still go out on your terms in a dignified way.

    but keep up the fight and demand due process the whole way!

  14. Fannie needs $8.4 billion more in tax payer funds… read it and weep…

    http://online.wsj.com/article/SB10001424052748703880304575236030191182938.html?mod=igoogle_wsj_gadgv1&

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