Negative Equity Continues Fight Against Housing Prices

Housing prices are back to where they were at the start of 2003, and things are not getting any better.  CoreLogic showed that negative equity data showed that 10.7 million, or 22.1%, of all residential properties with a mortgage were in negative equity at the end of the third quarter of 2011.  CoreLogic’s new third quarter data noted that this was actually a small drop from 22.5% in the second quarter.  There is a high number as well with insufficient equity where there are high loan-to-value ratios.

An additional 2.4 million borrowers were in the “near-negative equity” class as they had less than 5% equity in their homes.  The total negative equity and near-negative equity came to 27.1%, down marginally from the 2.5% reading in the second quarter.

In the Realty Check by CNBC’s Diana Olick noted, “All that was gained is largely now lost, and the effect on home ownership could continue for decades.”

Many homeowners are buried deep in their homes, with many down 30% or more.  Many areas of Nevada, Arizona, and elsewhere have just not recovered handily outside of seasonal sales. With unemployment so high, many of the regions are likely to continue facing hard times.  Let’s hope that it is not truly “decades” as predicted above.

Another big issue is rarely discussed, but that is the shadow inventory.  These are all the homes that the banks have not released for sale yet or which are pending foreclosure and soon to be on the market.

JON C. OGG