Homeowners who want to trade up are stuck waiting

There is a simple graph from CalculatedRisk.  Only 38% of home owners with mortgages have equity in their homes.  You can't be a trade up buyer if don't have equity that will allow you a significant down payment.

Potential move-up buyers like the Mors are largely sitting on the sidelines these days, leaving a key part of the housing market stuck in neutral. The promise of rising prices and upward mobility, once a powerful force in the American housing narrative, has been all but shattered by the downturn.

"The move-up market is a conveyor belt, and everyone moves up a rung, but that has kind of gotten gummed up during the housing recession," said Stan Humphries, chief economist of the real estate website Zillow.

Although there is no way to precisely to track move-up buyers, such shoppers often are looking in the $300,000-to-$800,000 price range, according to San Diego real estate research firm DataQuick.

And it help out my argument

Lower-cost starter homes, which bore the worst of the subprime mortgage fallout and often are in less established neighborhoods, made up the bulk of sales since prices began falling four years ago. First-time buyers are competing with investors who pay cash to scoop up properties on the cheap to renovate and resell them for profit or hold on to them for rental income.

Finding the money to go upscale is another problem.

Many first-time buyers have been able to finance their purchases with government-guaranteed mortgages allowing for very small down payments. But requirements for these loans are more stringent for repeat buyers. In addition, banks' lending criteria have tightened significantly since the boom years, real estate agents and economists said, and so-called jumbo and adjustable-rate loans remain difficult to secure.

The loss of home equity also is keeping homeowners tied to their properties, economists said. More than 1 in 5 Americans with mortgages on their properties owe more than their homes are worth, according to Santa Ana research firm CoreLogic.

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