Monday, December 13, 2010

Fewer Homes `Underwater' Last Quarter as Foreclosures Rose

This report just indicates the more of the shadow inventory is just starting to hit the market.  However, I expect the 4th report to be worse due to the increasing mortgage rates.
About 10.8 million homes, or 22.5 percent of those with mortgages, were “underwater” as of Sept. 30, the Santa Ana, California-based real estate information company said in a report today. 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 today. “Price appreciation or disposition, which means people getting taken out of their homes. At the moment, there’s more disposition.”
 More predictions of price drops.
Equity in U.S. homes 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
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