This is something we've long predicted as we called the current period the year of the 'walkaway' - when people got into homes they should not be in, and like any rational person see no sense in continuing to pay for an asset that is depreciating in value - especially when the 'free market' decided they could now buy $300K assets with "no money down!" So they have nothing invested (many mortgages even threw the closing costs into the principal - as long as you had a pulse you're in!) So many walk away - after sitting in house "rent free" for a while of course. Leaving some ghost towns. [Aug 4: WSJ - After the Bubble, Ghost Towns Across America] Or in the older neighborhoods, pockets of blight (always a good thing for property values, no?).
As foreclosures mount, this figure will only grow, since we are still not getting market clearing prices in many of the (once) most overheated markets - many of the transactions, blog readers who have been around for a while will recall, are foreclosure sales - hence the "uptick in sales which clearly marks the bottom - for the 23,125th time" everyone is getting breathless about. [Apr 26: Bankrate.com - Average Joe Still Can't Afford a Home]
So if, as I believe, home prices in much of the nation continue to fall for another 18 or so months (if not longer) and we put millions more underwater - many of which have outstanding home equity lines - how much recovery will we have from gas going from $4.10 to $3.25? Again, the "logic" of some of this trading is simply untenable.
- Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.
- Second-quarter home prices fell 9.9 percent from a year earlier, giving 29 percent of owners negative equity, said Zillow, the Seattle-based service that offers values for more than 80 million homes.
- For those who bought at the 2006 peak of the housing market, 45 percent are now underwater, Zillow said.
- Negative equity and declining prices are making it difficult for homeowners to sell property for a profit. Almost one-quarter of U.S. homes sold in the past year were for a loss, Zillow said. That contributes to the foreclosure rate because some homeowners can't absorb the loss and end up surrendering their homes to the bank that holds the mortgage.
- `It can also be harmful to communities where the number of unsold homes adds more to inventory and puts downward pressure on prices.''
- In Stockton and Modesto (California), more than half the sales in the second quarter were of foreclosed homes, Zillow said. Almost 15 percent of sales nationwide were foreclosures, the company said.
- The median home price of $206,919 was the lowest since the fourth quarter of 2004, the company said.