Considering the current record low interest rates and high affordability of real estate due to lower home values, the housing market should be booming. Instead, NAR recently reported that the inventory of for sale homes is down 24% from July 2011. Many real estate pros feel that this drop is due to the stalemate position of move-up buyers. The move-up buyers are those who bought homes with plans of "moving up", and now find themselves in a negative equity situation. Many that fall into that category also fall between the cracks when it comes to finding help from either a mortgage lender or federal agency.
In an interview with CNBC, Jason Royal of south FL, a homeowner in just that position, had this to say, "Because we've been current on our payments and have never been late or missed one, we don't qualify for any of these short sales or any of these special programs to help underwater borrowers."
CoreLogic estimates that around 11.4 million borrowers are currently in a negative equity situation. In terms of residential properties with a mortgage, that translates to 24 percent. Of those borrowers, approximately 2.3 million have less than 5 percent equity, which is known as "near" negative equity.
Mortgage analyst, Mark Hanson explained to CNBC that most move-up buyers will need about 20% equity in their current home to move up. He further noted that by his calculation, there are close to 25 million borrowers who do not have that level of home equity. Based on his research, it is not surprising that the Mortgage Bankers Association stats show that applications to buy a home were down by 6% from last year's figures.
Many market watchers cite the immobile move-up buyers as the wrench in the works of the housing recovery. Apparently, they are taking a "wait and see" approach before committing to any more home purchases. With all that being said, there appears to be some major improvements in the residential housing market. Back in May, the S&P Case Shiller Composite index showed that home prices improved in 18 of the top 20 markets surveyed. Home builder confidence is also at the highest level in the past five years.