Number of Underwater Homeowners In US Climbing

Published by: Kelly Curtis on 9th Feb 2011 | View all blogs by Kelly Curtis
Number of Underwater Homeowners In US Climbing

A new report from real estate information provider Zillow.com shows that 27 percent of American homeowners are now “underwater” on their homes, meaning they owe more than on the loan than their home is worth, up from 23 percent in the previous quarter.

Analysts attribute the rise to a number of foreclosure moratoriums implemented by US lenders and falling home prices.  Zillow also reported that US home values experienced their biggest one quarter drop in home values since the beginning of 2009 in 2010's final period, falling 2.6 percent from the third quarter.  Experts say the federal tax credit for homebuyers, which greatly boosted demand in the first half of 2010, prompted a dip late in the year.  Home prices, the Zillow report said, were down 5.9 percent in the fourth quarter, as compared with the prior year.

Because many lenders voluntarily halted foreclosures when the robo-signing scandal came to light, many homeowners who should have had their properties seized were allowed to stay put, driving the nation's negative equity pool higher.  Falling prices didn't help, either.

Movement in home prices typically trails sales activity, whether the trend is upward or downward.  Home sales have been on the rise over the last few months, but with distressed sales accounting for anywhere from 25 to 50 percent of those sales, depending on the market, prices are expected to remain under pressure for some time.

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