The number of homes worth less than the debt owed on them dropped in the third quarter, largely because of mounting foreclosures rather than a rise in property values, according to CoreLogic Inc.
About 10.8 million homes, or 22.5 percent of those with mortgages, were “underwater’’ as of Sept. 30, the Santa Ana, Calif., real estate information company said yesterday. That was down from 11 million, or 23 percent, at the end of June, the third straight quarterly decline.
Falling property values and unemployment near 10 percent have spurred a surge in foreclosures. The number of homes offered in foreclosure auctions averaged 110,000 a month in the third quarter compared with about 98,000 in the same period a year earlier, said Mark Fleming, CoreLogic’s chief economist.
“There are two ways to reduce negative equity,’’ Fleming said in a telephone interview. “Price appreciation or disposition, which means people getting taken out of their homes. At the moment, there’s more disposition.’’
A further decline in prices threatens to increase the number of homeowners with negative equity, Fleming said. US home values will probably drop $1.7 trillion this year after rising foreclosures and the expiration of buyer tax credits that boosted demand early in the year, Zillow Inc. said Dec. 9. More than $1 trillion of the drop came in the second half, according to Zillow, a Seattle-based real estate data company.
The asset value of real estate held by US households fell by $649 billion in the third quarter to $16.6 trillion, the Federal Reserve said Dec. 9. Home prices may drop as much as 11 percent more through the first quarter of 2012 before finding a bottom, according to a Morgan Stanley report last week.
“House prices are going to fall more next spring and that will bring more negative equity,’’ Fleming said.
Negative equity discourages homeowners from maintaining their property or their payments, “because their financial interest [the equity] has disappeared and has only a small prospect of returning soon,’’ CoreLogic said.
About 2.4 million borrowers had less than 5 percent equity in their home from June through September, bringing the total amount of mortgaged homes underwater or near negative equity to 27.5 percent.
Banks seized a record of 288,345 homes in the third quarter, up 7 percent from the previous three months and 22 percent from a year earlier, RealtyTrac Inc., an Irvine, Calif., real estate data service, said in October.
In Nevada, 67 percent of homes with mortgages were underwater in the third quarter, more than any state, CoreLogic said. It also has the highest rate of foreclosure filings, with one in 79 households receiving a notice of default or foreclosure in October, according to RealtyTrac.
States with the lowest rate of underwater homes included Oklahoma at 6 percent, New York at 7 percent, Pennsylvania and North Dakota at 7.4 percent, and Montana at 7.7 percent.
By John Gittelsohn Bloomberg News / December 14, 2010
No comments:
Post a Comment