With all of the talk in the news lately about the prospect of a housing bottom, the 800 lb gorilla in the room goes largely ignored.
But huge, hairy and mean, there he sits. And he's getting hungrier by the minute.
That's because the much bigger problem here—for borrowers of all stripes—is actually the continuing decline in values that could reach as high as 40%.
So sure, while lower rates have helped to stabilize housing, the fact is rates can and will go higher from here.
That will keep the lid on any meaningful home price appreciation for years to come.
That's the ultimate dilemma facing the millions of homeowners who have suddenly found themselves underwater and upside-down on their mortgages.
Unfortunately, it is a number that continues to grow.
“Plummeting home values have left nearly one-fifth (21.9 percent) of all Americans under water on their mortgages in the first quarter of this year, according to a newly released report from Zillow, an online real estate information company.
That’s up from one-fifth, or 17.6 percent, who owed more on their mortgage than their property was worth in the fourth quarter.
Nationwide, foreclosures and short sales remained steady in the first quarter. About one-fifth, or 20.4 percent, of all transactions were foreclosures in the previous 12 months, compared with 19.9 percent in the fourth quarter. Short sales made up 11.9 percent of all transactions in the last 12 months, compared with 10.9 percent in the fourth quarter.
There have been some early signs of improvement in some of the harder-hit markets in California, where there have been smaller year-over-year declines.
“Slowing declines in select markets are a bright spot – or, at least, what passes for one, given current market conditions," said Stan Humphries, Zillow vice president of data and analytics, in a news release.
However, he added that we’re still many months away from the bottom and an even longer wait before there’s a meaningful recovery in home values.
Meantime, those who are thinking about selling their homes are still holding off until they see better evidence of an improved housing market, according to Zillow.
One-third of all U.S. homeowners said they would be at least somewhat likely to put their home up for sale in the next 12 months, if they saw signs of a recovery. Twelve percent said they would be “very likely” to put their home on the market, eight percent said they would be “likely” and 12 percent said “somewhat likely.”
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