Negative equity falls, still a long way to go

From CNBC:

Home values rise, but millions still drown in debt

More than three million U.S. borrowers have risen above water on their mortgages so far this year, thanks to swift home price appreciation, according to a new report from online real estate company Zillow.

The negative home equity rate fell in the second quarter of this year, the fifth straight quarterly drop, but it is still alarmingly high and continues to hamper the housing recovery.

Currently, 23.8 percent of homeowners with a mortgage, or approximately 12.2 million, owe more than their homes are worth, down from 15.3 million one year ago, according to the report. Some, however, are still so far underwater that even with fast-rising prices, it will take years for them to see any home equity.

“Widespread rising home values during the past year have helped chip away at negative equity nationwide, helping many homeowners who were only modestly underwater to come up for air. For those homeowners who are deeply underwater, though, there is still a long row to hoe,” said Zillow Chief Economist Dr. Stan Humphries in a release.

Nationwide, more than half of all underwater borrowers are in in the red by 20 percent or more, and roughly one in seven owes more than twice what their home is worth.

The numbers seem incredible, given that home prices are up about 12 percent year-over-year, according to the latest S&P/Case-Shiller home price index for June, but that same index shows prices nationally are still off 23 percent from their peak in 2006. In some of the hardest hit housing markets, home values are still down around 30 percent from their recent peaks.

“Negative equity will be a factor in these markets for years to come, constraining the supply of homes for sale and keeping people out of the market who might otherwise get involved,” said Humphries.

This entry was posted in Economics, Foreclosures, Housing Recovery, Mortgages, National Real Estate. Bookmark the permalink.

67 Responses to Negative equity falls, still a long way to go

  1. Negative equity is here for at least a generation.

    Housing market is dead money for the next 50-100 years.

    Word.

  2. Brian says:

    I don’t have much equity, but at least I’m not underwater anymore. You can com back from it. It’s not the end of the world as long as you don’t have a payment you can’t handle.

  3. Stuck inside of Mobile with the Memphis blues again.

  4. JSMC says:

    #4 (Brian, before prior spam is deleted)

    Maybe it’s because I’m young and naive, but always thought that even if you are underwater, if you are at least still able to make your monthly payments, you should be ok right? At that point it’s not so much about “building” equity as it is “recovering” equity, but you are making your payments and you aren’t being tossed on the street. Maybe I’m missing something math…?

  5. Brian says:

    It’s not just about math….The one thing you sacrifice if you are underwater is your mobility. You can’t leave withoug taking a loss…..well…legally anyway. I guess you could rent the place if you had to move but that is a huge hassle. Many people who bought houses a the peak (including myself) couldn’t afford to make up the difference. If you planned on being there for a long period of time, then it’s no big deal.

    8.JSMC says:
    August 30, 2013 at 8:09 am
    #4 (Brian, before prior spam is deleted)

    Maybe it’s because I’m young and naive, but always thought that even if you are underwater, if you are at least still able to make your monthly payments, you should be ok right? At that point it’s not so much about “building” equity as it is “recovering” equity, but you are making your payments and you aren’t being tossed on the street. Maybe I’m missing something math…?

  6. The Original NJ ExPat says:

    Sure. So long as you make your monthly payments on your 30 year fixed rate mortgage, and pay your escalating tax bill, and pay for all maintenance and utilities bills, you’ll be fine. In fact, if you make all those payments for just 22 years you will have paid down a full 50% of your principal on the mortgage. At that point in time you will be old and naive.

    Maybe it’s because I’m young and naive, but always thought that even if you are underwater, if you are at least still able to make your monthly payments, you should be ok right?

  7. The Original NJ ExPat says:

    Default is not illegal.

    It’s not just about math….The one thing you sacrifice if you are underwater is your mobility. You can’t leave withoug taking a loss…..well…legally anyway

  8. Brian says:

    Isn’t default breech of contract?

    14.The Original NJ ExPat says:
    August 30, 2013 at 8:28 am
    Default is not illegal.

  9. Brian says:

    breech = breach

  10. Ottoman says:

    Isn’t default breech of contract?

    Not when the terms of default are layed out in the contract itself. You are not walkng into the vault at night and stealing their money. The bank signed onto the risk and you signed on to the consequences of not paying. When corporations default, it’s considered a business decision that can sometimes lead to renegotiations. If more regular people though like this, the banks would have less hold on us than they do.

  11. grim says:

    Still working on the spam issue … obviously.

  12. JJ says:

    Those underwater stats are a little misleading

    It is saying 23.8 percent of homeowners with a mortgage are underwater.

    As of now 50% of homes are bought for cash. So most likely it is something like 12% of the total population of homes have negative equity.

    Also I find surprising when I see short sales listed is a decent amount are listed at above the purchase price. Folks refinanced and cashed out at peak based on peak values. Now they are doing a short sale.

    Even at peak if someone did a conforming mortgage did 20% down and has been making payments each month they will be above water very soon even if home values are still down as they are starting to hit principal years.

    Folks like Brian who are not walking away and may never move when housing rises a bit more will start throwing a few extra grand each year from bonus at that balance and get the principal moving down. This is what happened to all the 1987 folk by 1996.

  13. Brian says:

    What was the housing market like in 1996? There’s a crappy rental down the street from me that is like the ugliest turd on the street. Nobody maintains that place. I was on zillow and it says the place is in preforeclosure. It also says the place was last sold in 1996.

  14. grim says:

    Zillow report is showing for the NY Metro – 18.7% of all owner occupied homes are underwater:

    http://www.zillowblog.com/research/2013/08/28/negative-equity-rate-falls-for-5th-straight-quarter-in-q2/

    And they are underwater by an average of $126k. While this isn’t the lowest listed number, it is among the lowest % underwater of all major metros. For example, Miami – 34%, Tampa – 36%, Chicago – 35%, Atlanta – 44%, Washington – 25%, Las Vegas – 48%, Charlotte – 28%.

  15. Fast Eddie says:

    Some, however, are still so far underwater that even with fast-rising prices, it will take years for them to see any home equity.

    Either that, or they’ll be dead. I’m sorry they’re in that situation but some of us just refuse to take their mistake off their hands. Show me a house that doesn’t have too many personality disorders and I my take a look. The problem is, the sparse inventory that’s sitting is trolling for s.uckers. Sorry, not interested.

  16. chicagofinance says:

    Tonight……we as a people will get to the promised land…..
    http://www.livenation.com/events/250540/aug-30-2013/depeche-mode

  17. grim says:

    What was the housing market like in 1996?

    In NJ? That was just about the best time to buy in the last 30 years.

    http://njrereport.com/80sbubble.htm

  18. Fast Eddie says:

    Zillow report is showing for the NY Metro – 18.7% of all owner occupied homes are underwater.

    Staggering. It’s impossible to find a house that’s publically listed. The only way to find the house you want is by networking. Multiple listings sites are beyond worthless.

  19. grim says:

    The vast majority of underwater homes in Northern NJ are located in towns that nobody on this blog would even remotely consider buying in.

    The towns that are of most interest on this blog are also the towns with the absolute lowest negative equity rates in Northern NJ.

    For example, Wyckoff – 5% of mortgage holders in negative equity. With around 1/3 of homes in town owned free and clear, we’re really talking about a negative equity rate of 3.3%

    3 houses in 100.

    Compare this to 07114 in Newark – 64% of all mortgaged homes underwater.

  20. Comrade Nom Deplume, knee jerk savant says:

    And with all this cheery news, I am off to close in 3 hours.

  21. grim says:

    Everything you need to know about negative equity in North Jersey can be found right here:

    http://www.zillow.com/visuals/negative-equity/#10/40.6869/-74.2861

  22. grim says:

    Sorry about not making it last night folks, my sitter had to leave early and my wife didn’t get back from work until around 7:30.

  23. JSMC says:

    17

    The image link is broken. I’m assuming it was high in the 80’s , low in the 90’s, and rose back up during the 00’s until 2008?

  24. Juice Box says:

    re# 16 -Do your leather pants fit still?

  25. Juice Box says:

    If you did not get the Leather Pants joke…. Here is Chi’s FanBoi site.

    http://leather-on-leather.tumblr.com/

  26. Brian says:

    I dunno Grim. I think that map is garbage. When I hover over Sparta it tells me I am in Roxbury. None of the township data is matching up properly with the map. Plus if it is based on zillow zestimates…I don’t put much faith in them.

    21.grim says:
    August 30, 2013 at 9:29 am
    Everything you need to know about negative equity in North Jersey can be found right here:

    http://www.zillow.com/visuals/negative-equity/#10/40.6869/-74.2861

  27. grim says:

    23 – High in the mnid to late 80s, by 89/90 the market was crashing, prices fell until somewhere around 92 or so and were flat until 97.

  28. Brian says:

    At my previous job, this site was blocked. Son of a B1tch.

    IT WOULD HAVE BEEN USEFUL TO HAVE THAT INFORMATION IN 2006!

    Damnit.

    17.grim says:
    August 30, 2013 at 9:19 am
    What was the housing market like in 1996?

    In NJ? That was just about the best time to buy in the last 30 years.

    http://njrereport.com/80sbubble.htm

  29. Fast Eddie says:

    Where’s the map that shows all those presitgious folks in Wyckoff that are hanging by a thread with $1600 in their bank account?

  30. raging bull jj says:

    The bottom non-inflation adjusted after 1980s RE crash was around 1992, Inflation Adusted 1996 ws the bottom.

    People forget home prices rising less than inflation is still falling home prices. When you bought at peak in Spring 2006 you may sell for what you paid for it in Spring 2020. But inflation adjusted it is not a pretty number

  31. Juice Box says:

    Who needs a house out in Hackensack?

    07621 To 10% in USA

    Homes Underwater 40%
    19% of them delinquent

    http://www.zillow.com/visuals/negative-equity/#14/40.9231/-73.9986

  32. grim says:

    Here:

    http://www.arcgis.com/explorer/

    Just a quick scan of the census tracts for Wyckoff, from the 2010 census, it looks like about 50-75 households in Wyckoff have a net worth of under $15k.

  33. raging bull jj says:

    I am thinking of last minute maybe catching DM at the Barclays Center next Friday. They are also playing next Sunday at Jones Beach but I am going to the Jets game that day. And unlike my single days where I would have gone to 1pm Jets game and 8 pm Rock concert on same day wives frown on that. Maybe if it was summer I could have done it but school is next day

  34. Fast Eddie says:

    grim,

    I have no idea on that map where to find that info, but even if it’s true, 50 to 75 households with a net worth of under 15K is horrifying. Horrifying! It’s beyond description. If one closes on a house in Wyckoff and doesn’t have a solid six figures in reserve separate from the house, they are playing with gasoline and a blow torch.

  35. grim says:

    34 – You know Wyckoff does have around 100 low-income and affordable housing units in town, right? As well as a number of rental units. Household applies to low-income units and renters just the same.

  36. Bystander says:

    Jsmc,

    Realize that many mid-50s to mid-60s boomers are living high because the govt. made sure that their pile of wood and formica tripled in value in last 25 years. They want Gen x and y to pick up the debt and tab. You believe homes will triple again by 2030? What will our generation get from father Fed?

  37. Fast Eddie says:

    grim [34],

    Low income, renters, whatever bucket we need to put them in may be true but it doesn’t remove the fact that too many yahoos were awarded houses in “need to have” towns because somebody wanted their commision. From the house tour guide to the d0che with the comb-over on Wall Street, somebody was smelling pay day and became blind as a f.ucking bat. Result? Those who played the game based on a real set of rules got rammed up the @ss for trying to do the right thing and they expect us to get rammed up the @ss again, hoping we’ll bail them out. F.uck em all, ain’t gonna happen on my dime and the very few of us left that can see a con game a mile away.

  38. JJ says:

    Mid 50 to mid 60 baby boomers quite often lost a ton on housing. It is their parents who made the ton of cash.

    Plenty of folk on this board like 1987 condo buyer bought at peak that time lost money, then when kids came in mid 90s bought a starter home and traded up just in time for peak.

    Also remember, a lot of home gains are fake. Their is a condo development near me that was built in 1979. It has a few old folks living there who bought in 1979. Originally, they cost 45k in 1979. Guess what every single unit inflation adjusted is worth less in 2013 than in 1979, early 1980s we had double digit inflation sometimes 16%, homes prices were stagnant.

    Pretty much homes purchased in the 1950s to 1960s with 30 rate fixed low interest mortgages where owner never traded up are the ones sitting on a ton of cash. But those folks are not 50 to 60 year old crowd.

    Inflation adjusted homes bottomed 1996 in last twenty years and it was not until 2002 they started taken off. A young couple around corner from me got married Spring 2000 and bought their house for 280k now worth 440K. I see it on the market now and they are looking for some sucker to buy the home in a flood zone and move on. They are late 30s. The older folks who bought same house in Spring 1986 are the screwed ones. 27 years worth of taxes and maint and they paid same 280K.

  39. grim says:

    I’m not saying that isn’t the case, but if you are looking for wholesale financial armageddon, you’ll have a better change of finding it around Newark, and not Saddle River.

  40. Steve says:

    Does anyone happen to know why Rockaway Township taxes are so high? I thought the mall and other ratables would lower the rate, but it doesn’t look that way. Maybe there is too much low-end and not enough high-end housing in the ratable pool? Did they overspend on the schools and municipal services?

  41. Fast Eddie says:

    Agree. One could hold their financial breath way longer in SR than in Newark, without question. But the cheerleaders tooting the “all clear” horn in towns like Wyckoff, Ridgewood, etc, are firmly entrenched in stage 3 of the Kübler-Ross model. They’re wishing for a return of the year 2005 and I’m wishing for an increase of 200 basis points on the 30 year. If anyone wants to wager, I’ll give you a tip on who wins. Patience trumps insolvency every time.

  42. chicagofinance says:

    Give grim some credit…..It may have been posted in 2006….if not 2007….

    Brian says:
    August 30, 2013 at 9:40 am
    At my previous job, this site was blocked. Son of a B1tch.
    IT WOULD HAVE BEEN USEFUL TO HAVE THAT INFORMATION IN 2006!

    Damnit.

    17.grim says:
    August 30, 2013 at 9:19 am
    What was the housing market like in 1996?
    In NJ? That was just about the best time to buy in the last 30 years.
    http://njrereport.com/80sbubble.htm

  43. chicagofinance says:

    Juice…..
    Justin Timberlake played “Take Back the Night” for 150 fans at defunct club Maxwell’s in Hoboken on Wednesday, with thousands more showing up to try to catch a glimpse of the singer. Timberlake, fresh off the VMAs, tweeted a cryptic message with a picture of a microphone hours before, following it up with an invite and location just 30 minutes before the 8 p.m. showtime. The performance was filmed for a commercial for Target. Wife Jessica Biel was spotted on the scene.

  44. Brian says:

    42 – My previous job was like being in a prison. My boss constantly snuck up behind us to see what we were doing…blocked all blogging sites…plus it was the pre-iPhone days and there was a crappy cell phone signal in the partially below ground first floor where I worked anyhow. Even if he posted it I wouldn’t have been able to see it.

  45. Anon E. Moose says:

    Taking a long Labor Day weekend, but just here briefly to say thanks for the stalwarts who came out to smoke and drink at J&R last night. Regrets but no recriminations to anyone who couldn’t make it — next time.

  46. nwnj says:

    Steve – I wish I had the time to crunch the numbers, but my gut tells me that the “commercial ratables” theory is a myth when it comes to retail places.

    The two highest tax rates in Morris County are Rockaway Twp and Mount Olive, both have huge shopping plazas. I think the number of cops, road crews, etc., a shopping mall requires completely offset the commercial RE taxes. It wouldn’t surprise me if the towns were subsidizing the commercial areas in some cases.

    A commercial ratable such as an office complex is a completely different situation, no crime, congestion, far less traffic. They are clearly net contributors.

    Another problem in some of these towns is the number of apartments. Loads of apartments in Rockaway Twp. I think COAH was supposed to level out that effect somewhat, I don’t know if has though.

  47. grim says:

    42 – Feb 10, 2006

  48. Anon E. Moose says:

    Brian [8];

    Breech is when you come out a$$-first — kind of a funny malapropism.

  49. Former Rockaway Twp. resident says:

    #40 – Corruption. Best move I ever made was to leave there two years ago.

  50. Fast Eddie says:

    Moose,

    Enjoyed the get-together. I’m up for a smoke and a beer anytime. Shoot a line if you or anyone else wants to hang. Thanks again. :)

  51. 1987 condo buyer says:

    #38…just for record, JJ comments may be broadly accurate but I personally never moved from starter home, just expanded paying cash. Not that it really helped me, at best even on the house but it is mortgage free

  52. No one will be spared. No one.

  53. JJ says:

    I called the bubble Feb 1985.

    grim says:
    August 30, 2013 at 11:35 am

    42 – Feb 10, 2006

  54. JJ says:

    Now imagine if instead of condo you bought in 1987 you bought a a 30 year treasury back then at 9.75 coupon and took the interest payments and bought stock and then March 10.2000 sold all the stock and bought a house. Then right after Sandy when interest rates were at all time lows sold your 30 year treasury and bought a beach house cash and married a future hot stripper body model who shortly afterwards won mega millions.

    1987 condo buyer says:
    August 30, 2013 at 12:08 pm

    #38…just for record, JJ comments may be broadly accurate but I personally never moved from starter home, just expanded paying cash. Not that it really helped me, at best even on the house but it is mortgage free

  55. JJ says:

    chink bots are back, speaking of chinese.

    I find them very different from Indians. I think the Chinese unlike the Indians are great, they dont look down on people, dont care your religion, are not preachy. Dont travel in packs, keep clean and try to blend in all stuff I like. Never blame nothing on racism pay off their debts. Almost like Yellow Richie Cunninghams.

    But one thing that gets their Irish up. They do think everyones business is their business. For instance. Indian people on Long Island bought the Italian Resaurant from Scenes from an Itialian Restaurant and a bottle of Red and a bottle of white recently and wanted to knock it down and even more Crazy the 300 year Main Maid Inn where George Washington himself dined and slept. Neighbors were furious, my Chinese friend was defending the Indians, they were like what right do they have to tell anyone else what to do. Funny the thing I admired most about them is their one flaw. I guess men who like little boys, wife beaters, etc. I guess they also are like what business do people have interferring. The indians would get involved but they also think if you eat a burger you become a bug in the next life but honor killing of your own daughter is ok.

  56. 1987 condo buyer says:

    #60…now that is a classic…!

  57. Comrade Nom Deplume, packing boxes says:

    Back in the bagholder camp. After closing, Seller’s agent mentioned that they had two backup offers, one of them without any contingencies. I told him I knew that he had a decent backup. He asked how I could know that, and I told him that it was obvious when the sellers went from being accomodating to firm overnight.

    I didn’t tell him that I shopped the appraisal in order to get a low one. Didn’t do any good anyway.

    I’d love to play poker with this guy sometime.

  58. The Original NJ ExPat says:

    [28] Time to change your handle back to Bagholder Brian?

    At my previous job, this site was blocked. Son of a B1tch.

    IT WOULD HAVE BEEN USEFUL TO HAVE THAT INFORMATION IN 2006!

    Damnit.

    17.grim says:
    August 30, 2013 at 9:19 am
    What was the housing market like in 1996?

    In NJ? That was just about the best time to buy in the last 30 years.

    http://njrereport.com/80sbubble.htm

  59. The Original NJ ExPat says:

    [21] Holy crap, grim! That map has EVERYTHING I always wanted to see! Thanks.

    Everything you need to know about negative equity in North Jersey can be found right here:

    http://www.zillow.com/visuals/negative-equity/#10/40.6869/-74.2861

  60. The Original NJ ExPat says:

    Also that Zillow negative equity map confirms what I’ve been observing anecdotally here in Boston. We are back to peak pricing. I don’t think Boston participated as vigorously in the RE bubble and we’re still heavily effected by the tuition bubble that is yet to pop. I’m not confident these prices hold, which means I should probably sell. I even have a “Nomfirmation” of a possible market top;-)

  61. All over, but the crying.

  62. Juice Box says:

    Just in-case you know anyone around the age of 18 thinking of signing up for service.

    There is no walk in the park in Syria, for a country of 20 mil they have allot of fire power. A few hundred cruise missiles won’t stop retaliation against our friends in the region.

    http://viableopposition.blogspot.ca/2013/08/fighting-syria-well-armed-nation.html

  63. Fiddy Cents on the Dollar says:

    Don’t know if this was discussed earlier in the week — Did you see the story of the House that tipped over in Highlands near Sandy Hook ?? The bayfront section of the town is essentially below Sea Level. The Borough wants to raise every house in the flood zone. This, of course, led to an influx of wood butchers calling themselves “Perfeshinal House Raisers”.

    An outfit from Massachusetts lined up a bunch of jobs, but didn’t have enough experience to properly engineer the effort. They told the homeowner to go on vacation and they’ll “take care of everything.” A family friend calls the guy in Florida, “if you can get to a computer, check the NJ News 12 website…..your house is on TV !!”

    The poor fool is driving back up I-95 this week.
    http://newjersey.news12.com/features/sandy/highlands-house-being-raised-falls-off-lifts-onto-adjacent-house-both-homes-destroyed-1.5946557

  64. Comrade Nom Deplume, knee jerk savant says:

    [61] expat,

    Yes, I am calling the top.

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  66. Anon E. Moose says:

    Grim,
    “Negative Equity Falls” — That’s a Billy Joel tune, right?

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