Mar
Housing Needs SCUBA Gear
Nationally, 24% of all mortgages have outstanding values greater than the current market value. The term for this condition of negative equity is “under water”, hence the title of this post.
Michael Gerrity reports at the Real Estate Channel on the latest data from First American CoreLogic. In February, Nevada had 70% of mortgages underwater. Number 2 was Arizona, at 51%, followed by Florida at 48%. Another 3.8% of Florida homes were essentially flat to value, nearing submersion.
I have never seen in these reports if realty commissions, which are 5% and 6% in many markets, are included in the flotation or submersion status. Presumably, many more owners would be under water (and those already counted further under water) if these were recognized.
While some markets may have seen prices bottom, it is difficult to imagine what magic can preserve current prices in markets with the number of mortgages under water approaching or exceeding 50%. Unless a strong economic recovery increases employment and aggregate personal income, the scuba gear may not be widely applied and the weight of additional foreclosures will drag prices down further.
The latest high profile analyst to weigh in with a negative outlook for housing is bank analyst Meredith Whitney. See Edward Harrison’s post.
Disclosure: No psoitions.
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