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Fewer Homes are Under Water

|Includes:KBE, KRE, SPDR Homebuilders ETF (XHB), XLF reports that the percentage of borrowers who owed more on their mortgage than their house is worth fell to 21.5% in the second quarter.  It had been 23.3% in the first quarter.

Stan Humphries,'s chief economist, said that much of the improvement came from homes falling into foreclosure, wiping away negative equity. 

At least the relative stabilization of prices associated with the two home purchase tax incentive programs, now ended, prevented many more mortgagors from falling into negative equity status.  With falling demand crushing new home sales the past two months and lower numbers of pending home sales contracts foreshadowing declining existing home sales, there is concern that home prices may start declining again in the coming months.

A  consequence of a resumption of decline for home prices could see the number of under water home mortgages rising again.

Source: citing a Reuters article by Julie Haviv

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