How Long Will Negative Equity Last?

By
Real Estate Agent with Palatium Auction and Appraisal Service, Real Estate Auctions, Estate, Moving, Downsizing Auctions 618-233-1000 USPAP Appraisals proesch@ptauctions.net

There has been a lot of recent talk about mortgages in negative equity – underwater homes – and the impact on the housing market. In response, First American CoreLogic asked the question: When will these homes start to float?

The company estimates that the typical underwater homeowner will not begin to surface until late 2015 to early 2016. It’s an even longer stretch for some of the most depressed markets, where First American CoreLogic says the typical borrower in negative equity may not experience positive equity until 2020 or later.

Even in markets with low shares of negative equity, the recovery time will still be long because the few borrowers that are upside down are deeply in negative equity and these are typically not high appreciation markets, the company has concluded.

Although house price appreciation will, over time, offset negative equity, First American CoreLogic says amortization (the paying down of loan balances) will be a more significant remedy to negative equity. The company’s data shows that over the next 10 years, the

average loan balance will decrease by an annual rate of 3.3 percent; meanwhile home prices are expected to increase at a 3 percent annual rate over the next decade.

To forecast when the typical U.S. homeowner will achieve neutral and positive equity, First American CoreLogic looked at 10 key markets, plotting equity trends over the next decade, and assuming a nominal annual appreciation rate of 3 percent.

Of the markets studied, the Washington D.C. area is expected to reach positive equity by 2015.

Atlanta, Georgia; Dallas, Texas; and Riverside-San Bernardino, California are projected to rise to the surface in 2016. Boston, Massachusetts should find a balance in 2017.

Cape Coral-Fort Myers, Florida; Pittsburgh, Pennsylvania; Las Vegas; and Lancaster, Pennsylvania are forecast to reach positive territory by 2020.

Detroit, though, is not projected to recover even by 2020, because of its depressed economy.

The latest numbers from First American CoreLogic show that more than 11.3 million, or 24 percent, of all residential properties with mortgages were underwater at the end of the fourth quarter of 2009.

Among the new housing initiatives announced by the administration Friday was assistance for borrowers with negative equity. In order to deter these homeowners from strategically defaulting, the Treasury will begin requiring servicers to consider principal write-downs as part of their Home Affordable Modification Program (HAMP) evaluations for borrowers whose loan balance is more than 115 percent of the property’s current value. The plan also includes a Federal Housing Administration (FHA) refinancing program for negative equity mortgages.

Read the story

Posted by

Paul
Paul Roesch
Realtor, Auctioneer, CAI, AARE, CES, GPPA, ATS
Marketing Director 
Certified Distressed Property Expert, CDPE
618-407-8479 cell
proesch@ptauctions.net

 Add me as a Friend on Facebook Paul M. Roesch                                                                        

Free Sign Bidder Early Bird Notification of Upcoming Auctions

Auctionitnow  Father Time Auctions St Louis MO

All original text, video, and photo content is the exclusive property of Paul Roesch and / or Palatium Auctions (the Company) and may not be used without expressed written permission. All information deemed reliable but not guaranteed. All personal, real and intellectual property is subject to prior sale, change or withdrawal. Neither the Company or information provider(s) shall be responsible for any typographical errors, misinformation, and misprints and shall be held totally harmless. Listing(s) information is provided for consumers personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. The Company has no control over the quality, safety or legality of the Auction Items listed, the truth or accuracy of the listings or any other information provided by Sellers about the Items. Listings may be sold, withdrawn at any time or subject to change without notice.

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
ActiveRain Community
Location:
Missouri
Tags:
buy at auction
negative equity
sell high at auction
paul roesch cdpe
father time accredited real estate auctions

Spam prevention
Show All Comments
Rainmaker
1,082,280
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

Paul, while this isn't welcome news, it is not surprising. The 24% statistic is particularly shocking. I wonder what they are predicting for Jacksonville. We weren't hit as hard as Cape Coral, but we are in Florida and Florida was hit hard.

Apr 04, 2010 04:24 PM #1
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
445,825

Paul Roesch 618-233-1000

Real Estate Auctioneer CAI St Louis MO Auctions
How Does an Auction Work
*
*
*
*

Additional Information