Home prices may be on the rise, but America still has quite a few affordable homes. First time home buyers will want to lay their hands on them, but there is just one problem. These homes are not on the market as yet and will not be for some time. Why? The current owners of these homes have negative equity or are underwater on their mortgages. Until this situation resolves, all these people will find it hard to list and sell their homes even if they were willing to do it. The only way to face this difficulty is to go through a short sale or consume some of their savings.
A report, published by a reputed real estate website, claims that of all the homeowners who have yet to pay off their mortgages and own 33% of the most affordable homes in the country, 30% people were underwater on their mortgages when the first quarter of this year ended. Considering the priciest homes, 10% home owners are underwater and for homes with an average price, 18% people were underwater.
At a national level, there are nearly 9.7 million Americans who are underwater. As for the negative equity rate, that fell by 18.8%. Among all these people, around 37% cannot sell their house comfortably and buy a new one because they do not have enough money for the down payment and the closing costs. For these very same reasons, they cannot even go for refinancing.
For the past eight quarters, negative equity has constantly fallen. The first quarter of this year witnessed the lowest of these falls. Considering 2013, rates in the first quarter fell by 25.4%, and for the last quarter, this value was around 19.4%.
The chief economist of the real estate website told the press that it was unfortunate so many people were underwater on their mortgages. What was worse was the fact that this will be the case for years to come and will continue to slack the market’s performance especially at the lower end. He added that negative equity meant a decrease in inventory levels which just led to higher prices, making it even more difficult for people to buy homes.