11 Million Homes Have Negative Equity

Since back in 2007 I have been arguing that "It's Housing, Stupid" and that unless and until the housing market is revived, one can kiss the prospect of economic recovery good bye. Following disastrous reports on the declines in housing sales at the end of last week, The Hill has a story that looks at the 11 MILLION some homes with negative equity - something that forces homeowners to walk away and allow homes to go to foreclosure thus further depressing home prices. It's a downward spiral that isn't going to stop until lenders are forced to cooperate on short sales and/or truly restructure loans to avoid more foreclosures. The other HUGE problem is the fact that lenders have made it near impossible to get larger size loans which is killing the market for homes over 300-400,000. What is obvious to anyone with some experience continues to be lost on the White House and the bozos in Congress. Here are highlights on this continuing mess:
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As the housing market struggles to regain its footing, about 11 million homes are in negative equity, with those homeowners "trapped," said Sam Khater, a senior economist with CoreLogic. "It's like a giant anchor on the economy," he said.
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Although most of those people are current on their mortgages, they are unable to sell their homes because they would take too much of an economic hit: on average, about $70,000. That means people are unable to move for jobs or better jobs. So homeowners are left with three choices: try to negotiate a short sale, accept foreclosure, or stay put, Khater said.
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So far, the federal government's programs to try to help those with negative equity haven't had much impact, Khater said. . . . . To recover, the economy has to add jobs to help the housing market and said even the record-low mortgage rates are like "stimulating a dead corpse," said Anthony Sanders, a member of the Mercatus Center’s Financial Markets Working Group and a professor of real estate finance at George Mason University.
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CoreLogic estimates it will take six to eight years to eliminate negative equity especially in hard-hit areas, such as Las Vegas, where negative equity could take root for more than a decade. Negative equity remains concentrated in five states: Nevada, which had the highest percentage of negative equity with 68 percent of all of its mortgaged properties underwater, followed by Arizona (50 percent), Florida (46 percent), Michigan (38 percent) and California (33 percent), according to CoreLogic.
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The Obama administration's main program -- the Home Affordable Modification Program -- to ease home foreclosures permanently lowered mortgage payments for only 36,695 homeowners in July, the smallest increase since December, administration officials said recently. During the second quarter of the year, there were a record 269,952 home foreclosures, up 38 percent from the same period a year earlier, according to Irvine, Calif., research firm RealtyTrac.