Acccording to the Case-Shiller Index, home prices in 20 U.S. cities rose for a fourth straight month in September, leading some to believe real estate has reached a bottom.
However, compared with a year earlier, prices were actually down 9.4 percent.
What’s more, industry experts still worry that rising unemployment and foreclosures may end the brief rebound, causing prices to double-dip in 2010.
One of them is Joshua Shapiro, chief U.S. Economist at MFR Inc. who said today, “While many are interpreting the most recent results from this index as indicative of a bottom in home prices, we do not believe this to be the case.”
That’s bad news for millions of American homeowners, who can hardly afford to lose anymore equity.
In fact, according to a recent survey by First American CoreLogic, over 10 million homeowners are already underwater on their mortages.
Here’s the story on that score….
From the Wall Street Journal by Ruth Simon and James R. Hagerty entitled: One in Four Borrowers is Underwater
“The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.
Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.
These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn’t expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply.
Home prices have fallen so far that 5.3 million U.S. households are tied to mortgages that are at least 20% higher than their home’s value, the First American report said. More than 520,000 of these borrowers have received a notice of default, according to First American.
But negative equity “is an outstanding risk hanging over the mortgage market,” said Mark Fleming, chief economist of First American Core Logic. “It lowers homeowners’ mobility because they can’t sell, even if they want to move to get a new job.” Borrowers who owe more than 120% of their home’s value, he said, were more likely to default.
More than 40% of borrowers who took out a mortgage in 2006 — when home prices peaked — are under water. Prices have dropped so much in some parts of the U.S. that some borrowers who took out loans more than five years ago owe more than their home’s value.
Even recent bargain hunters have been hit: 11% of borrowers who took out mortgages in 2009 already owe more than their home’s value.”
The bottom in housing is nowhere in sight…that’s a given.
But what really scares me about all of this is what it’s doing to the middle class.
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