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Young homeowners are drowning

By Judy Martel · Bankrate.com
Tuesday, August 28, 2012
Posted: 6 am ET

Although home prices have been rising and the housing market is slowly improving, one sector of the market still faces an uphill climb. Approximately half of homeowners younger than 40 are underwater on their mortgages.

Nationally, about a quarter of homeowners still owe more on their mortgage than their home is worth, but the rise in home prices is moving many into positive equity. Younger homeowners remain more at risk because generally they haven't been in their homes as long, leaving them less time to build up equity, according to a report from an online real estate marketplace.

Still, the report puts a positive spin on the matter by stating that since younger, underwater homeowners are more reluctant to sell, it creates a tighter inventory of homes on the market, according to Stan Humphries, the site's chief economist.  A smaller inventory of homes for sale leads to higher prices, which will further help the market recovery.

Two of the major metro areas hit hardest by the housing bust are recovering faster than other areas of the country, according to the report. Miami-Fort Lauderdale and Phoenix saw the largest declines in the number of homeowners who are underwater. Las Vegas is the city with the highest proportion of distressed borrowers. Almost 69 percent of homeowners were underwater in the second quarter.

Are you seeing home values rising in your neighborhood?

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21 Comments
Ralph
August 31, 2012 at 6:08 pm

Chicago ? The entire upper midwest is in a declining real estate
market. We can't sell, there are no buyers and the banks are
only financing those that don't need it. We are currently asking 10K less than what we paid in 2000 with a 10K allowance
and no takers. We are going to shut it down for the Winter and
come back next spring.

Roger E
August 31, 2012 at 6:01 pm

After working for 35 years in the Hospitality Industry mainly the Airline, Hotel and Restaurant Industry I found myself disabled through "No Fault of my own." I had a decision to make about my future housing needs. I was living in a small studio apartment about 300 square feet. The landlord kept raising the rent every year. I elected to purchase a Manufactured Home because I knew that even with Lot Rent and the Mortgage on the Manufactured Home I would be able to keep up with it. I financed it on a 10 Year mortgage and paid it off 2.5 years early and then went on SSDI. I was approved for SSDI automatically because of an illness with NO CURE and without treatment not much hope of survival. Now my car is paid off too. I feel that I made the right choice for me at the time to purchase a Manufactured Home. I have lived in the Manufactured Home Park now for almost 9 years without any issues. It has been very pleasant and I have a fenced in yard for my dog. Along with a Wheelchair Ramp to easily get around. I think that many, many people make Poor Choices on their Housing Needs. What I have suits me just fine. I DID NOT grow up in Manufactued Home. I was raised in a Single Family Home. I took a Step Backward but I was successful in paying the Manufactured Home off. My Credit is Poor because of unpaid debts from when I became to sick to even care. They are still hounding me to this day. I just simply ignore them. Bankruptcy may be an option for me if a creditor tries to place a lien on my home. The USA is a Credit Driven Society. Not a Wealth (I Own It Outright) Driven Society. Many, Many people pass away drowning in debt with NO Assets. So sad.

Ed
August 31, 2012 at 5:45 pm

I tried to play by the rules. I have a good credit rating, and pay all of my bills on time. I am only in my early fifties, but I retired a few years ago because of a disability. I am now living on SSDI and my DOD retirement check. I have been denied refinancing twice now. Both times the lenders denied me a loan because of my “debt to income ratio.” How is someone on a limited income supposed to get ahead?

Cas
August 31, 2012 at 5:25 pm

We purchased my home in 2000, a month after my 21st birthday. Three years later, my husband became sick with cancer and died at the end of '03. Not only was I left with the tragedy of losing him, I was left with a mortgage I couldn't afford by myself. I ended up filing bankruptcy less than a year after that. I have since remarried, and with my husband's help, I was somehow able to stay in the house. Today, we are in our early 30's and still struggling to pay for this ridiculous mortgage.Changes of jobs and other life circumstances have made owning this house a huge burden. Can't wait til we can sell it!

dee
August 31, 2012 at 5:22 pm

While I feel bad for those facing these difficulties, and I fully believe that people should be able to refinanace their existing mortages for THE SAME AMOUNT THEY BORROWED, but at a lower rate, I do not think that people should be able to have their mortgages cut. That is the same as saying I wanted those designer jeans or that new car as soon as it came out, with markdowns, and then when they are not wotrh the full value anymore wanted to have then for the clearance price. The interest rate alone should be the only thing that is changed.

Danielle
August 31, 2012 at 5:03 pm

I am in the suburbs of Chicago...we bought our house March 2006 for $565,000 it is now valued at $385,000 and we owe $500,000! That is 130% LTV...Due to our jobs we can not default on our loan, but if my credit didn't matter, I would seriously consider it. I am early 30's and I am going to have to die in this home. I am just lucky that I rally like where I am at and it is big enough for my family to grow in. I feel very sorry for those stuck in their "beginner" homes.

Christine
August 31, 2012 at 4:51 pm

Here in Washington State, there are some signs of improvement but only if you're in a single family home, and if your close to Seattle. I'm about 18 miles SE of Seattle, in a condominium complex that is dying. No one's talking about the problem condo owners are having. The banks refuse to lend to condo owners, and are forcing the values to plummet to only what can be purchased with cash. Banks haven't loaned in this complex for over two years, so my condo value is only what they've been selling for in foreclosure sales. A 2-bedroom condo valued at $45K. Banks won't even finance their own short sales! I'm underwater $70K, and am defaulting just because of that.

My condo's are older, but I have a friend in Puyallup with nearly the same problem. His complex is only 4 years old, no loans in that complex either and their values are plummeting as well.

Whats going to happen to all these condos and condo owners?

Matt
August 31, 2012 at 4:46 pm

Not to worry. Last night Romney siad he was going to take care of this.

ron
August 28, 2012 at 8:39 pm

What matters is not how many are under water, but by how much. It's one thing to be a few % underwater, but quite another to be 15%+ underwater.

The entire crisis could be resolved over night if they simply decided to reset all mortgages to current low rates. But nope - they refuse to bail out the little guy - but shovel trillions to bail out the banksters.

Ray
August 28, 2012 at 8:37 am

No. The Chicago market is bad news with some variation (flat at best, declining elsewhere).