Number of Underwater Borrowers Decreased Slightly in June, Says Zillow
Real estate site Zillow said last week that the number of underwater homeowners in the United States decreased by around 400,000 as of the end of the second quarter of June. Homeowners who are considered “underwater” are those who owe a greater amount on their home loans than the present value of their homes.
According to Zillow head economist Stan Humphries, the slight decrease in underwater borrowers is a “positive signal” that bodes well for the state of the American real estate market.
A total of 15.3 million homeowners were classified as underwater – this still represents over 30 percent of all mortgage holders with negative equity. These borrowers have a greater chance of foreclosure and increased odds of having a hard time finding a new home.
As they would be losing money by selling their homes, this may force them to settle for significantly less-opulent surroundings. Humphries mentioned that most of these homeowners with negative equity are those below the age of 40.
While the number of underwater borrowers is still a huge concern and an obstacle in the way of the housing market’s recovery, total negative equity was down by $42 billion as of June 30. Currently, the amount of negative equity is estimated at $1.15 trillion. Average home prices, as per the S&P/Case-Shiller index of values, are still grossly undervalued as compared to 2006’s numbers.
Prices are down 33 percent from the June 2006 peak. Zillow, on the other hand, estimated this percentage below peak value to be closer to 22 percent – S&P/Case-Shiller measures values in 20 major markets, while Zillow is centered on metropolitan markets.