Underwater Mortgages on the Rise Again – Double Dip Ahead?
Underwater mortgages, or mortgages where home values are less than the amount owed on the loan, are on the rise again across the U.S. While many people would like to sell their homes, some mortgage lenders are taking longer than necessary in the foreclosure process. Other homeowners are simply mailing in the keys and walking away. Underwater mortgages usually lead to foreclosure, which isn’t good for the economy or lenders. In fact, most lenders will have to write off the loss for the original amount the home sold for on their balance sheets, which hurts their profitability.
According to CoreLogic, 23.1% of homes were underwater in the 4th quarter of last year. That represents about 11.1 million homes in the country today. Home prices will likely continue to drop in value for the next two years, but experts are still undecided on whether the housing market will improve sooner rather than later. As of now, many banks are still holding onto shadow inventory that would cause a price plummeting if they were all released into the markets at once. Homes are simply too expensive compared to incomes at the moment, though unemployment may be headed for a decline.
States with most Negative Equity
California, Arizona, Michigan, Florida and Nevada all had the highest negative equity rates in the country, with roughly half of the homes there being underwater. Nevada was by far the worst in the country with 2/3 of homes in negative equity. It’s no surprise that experts are advising people to hold off on home purchases as a double-dip is expected.
That said, you can always negotiate the price of a home much lower than what is being asked for in today’s market. Secure a good mortgage rate and save on your next home loan with US Banking Rates. We bring you the best rates from top lenders throughout the country. Buy with caution, and always make sure you’re getting a good rate to along with your next home.