Study: One-Fifth of U.S. Homeowners Owe More Than Properties Are Worth

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Submitted by JC on February 10, 2010 - 7:38am

Feb. 10 (Bloomberg) -- More than a fifth of U.S. homeowners owed more than their properties were worth in the fourth quarter as the number of houses and condominiums lost to foreclosure climbed to a record, according to Zillow.com.

In the fourth quarter, 21.4 percent of owners of mortgaged homes were underwater, up from 21 percent in the previous three months and down from 23 percent in the second quarter, the Seattle-based real estate data provider said today in a report. More than one in 1,000 homes were repossessed by lenders in December, the highest rate in Zillow data dating back to 2000.

Underwater homes are more likely lost to foreclosure because their owners have a harder time refinancing or selling when they get behind on loan payments. U.S. home values dropped 5 percent in the fourth quarter from a year earlier, the 12th straight quarter of year-over-year declines, Zillow said.

“While the next few months are likely to bring further home value declines in most markets, we do expect to see a national bottom in home prices by the middle of this year,” Zillow Chief Economist Stan Humphries said in a statement. “Thereafter, home values are likely to bounce along the bottom with real appreciation remaining negligible for some time.”

There were 2.82 million foreclosures in the U.S. last year, according to RealtyTrac Inc., the most since the data provider began compiling figures in 2005. The number may rise to 3 million in 2010, the Irvine, California-based company said last month.

Bank sales of foreclosed properties accounted for a fifth of all U.S. home sales in December, Zillow said. Such transactions made up 68 percent of sales in Merced, California; 64 percent in the Las Vegas area; and 62 percent in Modesto, California, the company said.

Almost 29 percent of homes sold in the U.S. went for less than their sellers originally 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.

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The headline is slightly
Submitted by UCGal on February 10, 2010 - 10:24am.

The headline is slightly misleading... It's corrected in the 2nd paragraph.

It should read 1/5 of homeowners who have mortgages owe more than the property is worth.

There's a significant number of folks who've been in their house for years and have no mortgage. I've seen estimates is as many as 1/3 of homes do not have a mortgage.

I think that the percentage
Submitted by briansd1 on February 10, 2010 - 11:59am.

I think that the percentage of people who have mortgages is much higher in California in general and in expensive markets like San Diego.

I'm not expecting a tsunami, but a trickle, trickle, trickle of properties onto the market.

For all purposes, stagnation of house prices, plus inflation amount to the same thing.

A "real" recovery is not a slight increase from the depth of the recession, it's a return to the peak and more.

If a property ladder climber put all his eggs in his house, and keeps on paying during the recession, even a return to previous peak won't make him whole. He still has some way to go before recouping his "investment."

It's probably slightly north
Submitted by Arraya on February 10, 2010 - 1:05pm.

It's probably slightly north of 30% in San Diego. That's like 200Kish underwater. fwiw

Good points from everyone.
Submitted by CBad on February 10, 2010 - 1:14pm.

Good points from everyone. It would be interesting to see local stats. I'd like to see Zillow incorportate the mortgage info. on the houses on their site! Is that even legal? I guess I'm just nosey.... :)

CBad, perfectly legal. It's
Submitted by briansd1 on February 10, 2010 - 1:45pm.

CBad, perfectly legal.

It's only a matter of time until that service is available for free. I'm waiting for Zillow to be acquired by Google and incorporate the service into maps.

The title companies and real estate companies now subscribe to paid services that give them mortgage information.

UCGal wrote:The headline is
Submitted by patb on February 10, 2010 - 2:03pm.

UCGal wrote:
The headline is slightly misleading... It's corrected in the 2nd paragraph.

It should read 1/5 of homeowners who have mortgages owe more than the property is worth.

There's a significant number of folks who've been in their house for years and have no mortgage. I've seen estimates is as many as 1/3 of homes do not have a mortgage.

1/3rd have no mortgage, 1/3 have a mortgage they got during the bubble.

what it is saying is 2/3rd of Bubble era home buyers are underwater.

It's a cohort,

think of the Housing ladder,

say there are 4 types of housing unit in 2000.

Condos, Town Houses, Single Family Houses and mcMansions

Arbitrarily in 2000.

Condos are 100K
TH's are 200K
SFH's are 300K
mcmansions are 400K.

by 2005 they have doubled. 15% appreciation by 5 years.

Condos are 200K
THs are 400K
SFH's are 600K
McMansions are 800K

assume each buyer put 10% down
condo buyer has 10K + 100K bubble equity.
TH has 20K + 200K Bubble Equity.
SFH has 30K + 300K Bubble Equity
mcMansion Owner has 40K + 400K bubble equity.

now look at moveups.

the Condo-> TH buyer puts 110 down on 400K, that's 25% equity.

The SFH Buyer puts 220K into a 600K house or 33% equity.

The McMansion Buyer puts 330K into an 800K place.
or 40% equity.

Now prices fall 40%.

the bottom guys are all underwater badly, the top
person is barely swimming, and making payments on
a much bigger note.....

it's why the proeprty ladder was so destructive.

briansd1 wrote:I think that
Submitted by patb on February 10, 2010 - 2:04pm.

briansd1 wrote:
I think that the percentage of people who have mortgages is much higher in California in general and in expensive markets like San Diego.

I'm not expecting a tsunami, but a trickle, trickle, trickle of properties onto the market.

For all purposes, stagnation of house prices, plus inflation amount to the same thing.

A "real" recovery is not a slight increase from the depth of the recession, it's a return to the peak and more.

If a property ladder climber put all his eggs in his house, and keeps on paying during the recession, even a return to previous peak won't make him whole. He still has some way to go before recouping his "investment."

A real recovery is the market trading without the Fed, FHA and treasury making enormous contributions to keep the suckers swimming.