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Fewer homeowners underwater

By Judy Martel · Bankrate.com
Thursday, January 9, 2014
Posted: 3 pm ET

Nineteen percent of homes with a mortgage were "deeply" underwater in December, meaning they were worth at least 25 percent less than the amount of any outstanding loans on the property. Although that represents 9.3 million residential properties, the number is down from 10.7 million in September, according to RealtyTrac.

The number of homes under threat of foreclosure is dropping in California, where homeowners are gaining equity.

The number of homes under threat of foreclosure is dropping in California, where homeowners are gaining equity.

The number of distressed homeowners has been steadily falling since a peak in May 2012, when 29 percent, or 12.8 million homes, were deeply underwater.

An injection of equity

Daren Blomquist, vice president at RealtyTrac, said in a news release that while falling home prices put millions of homeowners at risk of losing their homes to foreclosure during the housing crisis, the outlook is more positive as prices rise. "The percentage of equity-rich homeowners is nearing a tipping point that should result in a larger inventory of homes listed for sale and give the overall economy a nice shot in the arm in 2014," he added.

But millions of homeowners still live under the threat of foreclosure because they are so deep in the hole and any triggering event, such as job loss, could push them to the financial limit, he said.

Sunny, sandy and underwater

Nevada topped the list of states with the highest percentage of homeowners who are deeply underwater, at 38 percent. It was followed by Florida, 34 percent; Illinois, 32 percent; Michigan, 31 percent; Missouri, 28 percent, and Ohio, 28 percent – all states that were hit hard by the housing crisis and recession.

Places where owners have the most equity

States with the highest percentage of homeowners who had at least 50 percent equity in their homes in December included Hawaii, 36 percent; New York, 33 percent; and California, 26 percent. Montana, Maine and Washington, D.C., all came in at 24 percent.

Keep up with your wealth and mortgages and follow me on Twitter @JudyMartel.

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22 Comments
Phil Gallagher
January 12, 2014 at 12:55 pm

You're painting worst case scenario, What's a safer investment. The chances you property will go down in value is slim. The amount of living space, i.e. land, is fixed, the population is increasing

Phil Gallagher
January 12, 2014 at 12:44 pm

One thing to consider, where are you going to be 20-30 yrs from now. Cross that bridge when you get to it. Look 10 yrs ahead. When I bought 30 yr mort, my int was 10.5, later refi to 7.5, then 6 and finally paid it off with 10 yr home equity loan at 4.5. Paid 100 dollars a month extra, 25 dollars a week. No big thing. If you afford to buy, then buy. You don't know what the future will be. In the 1980's int rates were 20%, on mortgages. Housing was cheap but int rates were astronomical

Arleine Demien
January 12, 2014 at 12:08 pm

Isn't it WAY PAST TIME TO KICK DISHONEST ELECTED OUT of office(you'd think these 33 or 44 congressional millionaires were born in office,who have ruined the American financial system,for young people, old people, all/any American)? AND, GET this ERSATZ, presidential(?)twit out of the White House,along with dishonest Pelosi,Feinstein, Reed,& lying supporters (found guilty of breaking American laws but thumbing their noses at our Constitution,country, WE Americans, & getting by with it! Look at Holder?? All these financiers never lost a cent when joining this admn. in doing DIRTY JOBS on ALL America? Every American's being cheated on mtge.interest payments by their COMPANY shills doing jobs on honest Americans, without letting them see the true figures. WHAT's the deal,America? Isn't it our country thee days?

D Cross
January 12, 2014 at 11:32 am

Leo that's because interest is front loaded on a mortgage. Just like auto payment. Pretty soon that turns around & you are paying more principle. You seem to be stuck in the ATM house thought. Its a long term investment. You have to live somewhere. Refinancing will flip you back to paying more interest than principle all over again. Think long term.
I'll never save enough for retirement in my 401K joke. BUT I may save enough to pay my house off. Without rent or mortgage my social security will be plenty..

ed
January 12, 2014 at 11:30 am

my mortgage was with citibank after market fell i lost my job and never heard from citibank until they forclosed on my house
never even answered my request to redo my mortgage to a lower rate or roll my payments I was behind to end of mortgage.so much for the goverment bail out plan for home owners

Ronile
January 12, 2014 at 11:26 am

Leo, how much of your interest and property tax payments have you deducted on your income taxes? $200000 @ 4.5% = $$9,000 a year in interest. If you're in the 15% tax bracket, you reduce the $9,000 to $7,650. Ditto property taxes. Renters have zero equity gain. You don't say if you have/had a fixed rate loan, but if you do/did, your mortgage payment will remain the same. You had very little "skin" in the game to begin with ($5,000), which added to your monthly debt (mortgage insurance). Rents can and do go up. I don't know where you live, however, several parts of the country have recovered and prices (equity) are rising. It sounds like you have already moved from home ownership to renter. Wishing you well.

r mcguire
January 12, 2014 at 10:47 am

help! have a mortgage with Wells Fargo, not good in thee first place. they gave a deal to knock 200 off my mortgage a month called"deferred interest" I was told this would go on back of mortgage. Now they say a different story" I owe 10,000, in deferred interest at a adjustable rate, so my mortgage pay keeps jumping around, with the interest chages, they increased my payment already by 150.00 per month, even though my mortgage is a 30 year fixed rate. where can i go for help, with this?

Leo
January 12, 2014 at 10:46 am

I've paid $1,000 per month for 24 months, or $24,000. The 2 big differences are 1.) I don't lose money when the value of the property goes down instead of up and 2.) My $24,000 is still less than the $29,400 of which $19,788 was interest. 60 months of rent, $60,000, or 60 months of house payments $73,500. The good news is I don't still owe $181,500 on my $200,000 loan.

J. Slonski
January 12, 2014 at 10:10 am

How much would you have paid for rent?

Leo
January 12, 2014 at 10:00 am

Buying a home is played up as the best investment most people will make. Think about this. I buy a house for $205,000. I have a mortgage that starts at $200,000, 4.5%, 30 years. My monthly payment with escrow and mortgage insurance is $1225.00. After 2 years of payments, my loan balance is $190,386.00. A reduction of $9614.00. I've paid $1225.00 for 24 months, or $29,400. So much for investment. Most people will sell the house for say, $220,000 and say I made $20,000 on the sale. Unfortunately, you didn't even break even.

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