Fewer homeowners are now underwater, thanks to the surge in home prices. The number of underwater homes dropped below 10 million for the first time in 3 years. Another nugget that the improving housing market has rendered. The next likely domino to fall will be the limited number of homes that are for sale. Many homeowners are reluctant or unable to make their home available for sale, because they have little or no equity.
Rising home prices up over 12% nationwide have lifted 1.7 million home loan borrowers above water over the last year. If home prices continue to rise, expect more homes to hit the market in the near future. The declining ranks of underwater homeowners are a huge plus for the economy. Consumers with equity in their home are less likely to default on their loans, they’re also more avid spenders which improves other aspects of the economy. They are also more able sell their current home and purchase a replacement property.
The increase in equity allows homeowners to refinance and take advantage of lower interest rates to reduce their mortgage cost. As of December 2012, 45% of owners with mortgages still had loans with interest rates above 5%. The monthly average rate has been below 4% since late 2011. The states that suffered the biggest run ups in home price gains, then fell hard after the housing bubble burst, still lead in underwater borrowers.
Given the shortage of inventory and rising home prices, banks have little motivation to hold back on properties that have been repossessed. There are signals that the inventory crunch has bottomed. Nationwide, the number of for sale listings were down 12% in June from a year ago. But that’s less severe than the almost 18% shortfall recorded in January.
Short sales have also declined this year, with many owners holding their homes with the expectations their homes will gain in value and at least offer some hope that owners can expect to get back the lost equity that was lost over the last several years. Just as the economical downturn started with the housing collapse, the housing recovery will be the first step toward a full fledge improvement in the overall economy. Please visit my website www.JohnnyBrooksHomes.com for helpful tips on buying or selling a home, scan my informative bogs and easy access to view local area homes for sale in Davis, California and the surrounding communities.