From the WSJ:
As the real-estate market rebounds, many luxury homeowners who just a few years ago had their heads underwater are now only ankle deep.
At the end of the first quarter, 20.6% of homes with jumbo mortgages were underwater, meaning the owners owed more on the mortgage than the home was worth. That’s compared with 32.3% a year ago, according to real-estate website Zillow.com.
More important, the level of negative equity has improved significantly for homeowners, said Stan Humphries, chief economist for Zillow. “Nationally most people in negative equity are in relatively shallow water, with less than 20% negative equity,” he said, meaning that borrowers’ loan-to-value percentage is less than 120%.
The Zillow analysis includes homes that have one jumbo mortgage and whose unpaid balance is still at a jumbo level, above the threshold for government-backed loans of $417,000 in most areas of the country and $625,500 in certain high-price home markets, such as New York, San Francisco and Boston.
The strengthening economy and housing market have boosted the value of high-end homes, which has translated to fewer homeowners underwater. As a result, more borrowers with jumbo mortgages will be eligible to refinance their loans at a time when interest rates are still historically low and the availability of jumbos is improving. As of June 21, the interest rate for a 30-year, fixed-rate jumbo was 4.52%, just 0.06 percentage point above the 4.46% rate for a 30-year fixed-rate conforming loan, which falls under the threshold for jumbo loans.
In the New York metro area, 14.5% of homes with jumbo mortgages are currently in negative equity, according to Zillow, but home values in Manhattan appear to have stabilized back to normal levels, said David Adamo, CEO of Luxury Mortgage, a lender based in Stamford, Conn. “Jumbo refinancing is back to business as usual,” he added. “We’re doing them all day, every day.”