Wednesday, February 9, 2011
Flash Repot on housing
The number of borrowers who owe more on their mortgages than their homes are worth, called negative equity, took a huge leap in the fourth quarter of 2010. A full 27 percent, over 1 in 4 mortgages of borrowers are now “underwater” on their mortgages, up from 23 percent in the previous quarter, according to a new report from Zillow. They believe that the foreclosure moratoriums and falling home prices are to blame.
Adding to a slew of negative reports on home prices, Zillow found home values posted their largest quarter-over-quarter decline, 2.6 percent, since the beginning of 2009. Home prices plunged 5.9 percent compared to the fourth quarter of 2009.
Florida, California and Arizona that suffered most from the sub-prime mortgage collapse continue to post high negative equity rates, other less likely candidates are climbing. Over one third of Chicago borrowers owe more than their homes are worth, and in Atlanta over half are underwater. Denver and Minneapolis are also well over the national rate.
It is hard for me to believe that the Fed will increase interest rates until jobs expand and the housing market at least stabilizes. We will have to wait and see the impact of the lifting of the foreclosure moratoriums will have on both supply and prices before we can look for a bottom in the real estate market.