Olick – half of all mortgages are underwater

“A new report on still-falling home prices today highlights the
fact that the lower those prices go, the more American borrowers
fall into an negative equity position; that is, they owe more on
their mortgages than their homes are worth.  Most analysts will
tell you that negative equity is the number one problem in the
housing market today, even worse than foreclosures, because it
causes foreclosures, stymies consumer spending and traps
potential home buyers and sellers in place.  Negative equity rose
to 28.6% of single-family homes with mortgages in the third
quarter of this year, according to Zillow. That’s up from 26.8%
in the second quarter. In real terms, that’s 14.6 million
borrowers.  Many of those borrowers are already behind on their
mortgage payments, and some are likely already in the foreclosure
process. The rest of them are in danger of defaulting, not
because they can’t pay their mortgages, but because they either
won’t want to (seeing as they will never see any real
appreciation in their investment) or because any change in their
economic or personal situation might force them into default
(change of job, divorce).

While 14.6 million might seem like a lot, it’s not the real
number when you consider negative equity in housing’s recovery.
That’s because it doesn’t factor in ‘effective’ negative equity,
which is borrowers who have so little equity in their homes that
they cannot afford to move.  Consider the following from mortgage
analyst Mark Hanson:  ’On US totals, if you figure average house
prices use conforming loan balances, then a repeat buyer has to
have roughly 10% down to buy in addition to the 6% Realtor fee to
sell. Thus, the effective negative equity target would be 85%.
You also have to factor in secondary financing, which most
measures leave out.  Based on that, over 50% of all mortgaged
households in the US are effectively underwater — unable to
sell for enough to pay a Realtor and put a down payment on a new
purchase without coming out of pocket. Because repeat buyers have
always carried the market as the foundation, this is why demand
has not come back. It’s as if half the potential buyers in
America died over a two-year period of time.’

The foreclosure crisis grabs most of the media attention these
days, but in order for housing to recover, the market needs to
see activity.  It’s as simple as buying and selling. Negative and
effective negative equity are causing stagnation, which may in
the end be far more detrimental than foreclosures. The argument
to solve this problem is principal forgiveness, and it is gaining
traction politically and somewhat less in the banking sector.
Principal forgiveness, or lowering the balance of a large chunk
of the nation’s mortgages, would be costly at best but could be
catastrophic at worst. ‘Those thinking principal reductions are a
panacea have never originated a loan, done the street level
research, and do not really know the borrowers behind their
data,’ argues Hanson. ‘More than likely it would create a far
greater number of new strategic defaulters than the number it
would legitimately save from Foreclosure.’”

This is a test post for my new site.

Announcing our NEW Brevard MLS Home Search System.  HouseMax Pro Realty just updated their Brevrd MLS Search to a new improved search engine.

With this new home search system, people looking for Brevard County homes for sale will be able to set up daily AUTO-UPDATING email searches for Brevard County homes that meet their home buying specifications…you will have total control…you can set up your search for only for Brevard County foreclosures or you can set it up to send all Brevard County homes in their price range that are Active in the MLS and you can even eliminate short sales from your search.  We even have a search where you can just browse ALL Brevad County Homes for sale by city & price range….you have total control.  You can also set up more than one email search and have it forward to another email address if you like.

If you would like to give this new system a try, just hop on over to http://bit.ly/r5cT9i and start searching the Brevard MLS today.

We also put together a short video to show you how easy it is to use this system and how to set up your searches.  Be sure to watch the video to learn tips and tricks to setting up you Brevard home search.