The value of homes continues to decline. A recent report underscores that as property values decrease, an increasing number of American homeowners are plunging into negative equity. This means they can’t sell their properties for a sum sufficient to pay their real estate agents and finance the down-payment for a new property without dipping into their savings.
The issue of foreclosures remains significant, but falling property values and negative equity are taking a greater toll on the housing market. Data from Zillow reveals that during the third quarter of 2011, about 28.6% of U.S. homeowners had mortgages that exceeded the worth of their houses. This figure corresponds to approximately 14.6 million borrowers.
In certain regions of the U.S., the slump in property values is notably severe. A study by 24/7 Wall St. identified former booming housing markets, such as California, Florida, and the Southwest, as the areas most challenged by underwater mortgages. The high volume of listed properties may be a factor pushing home values lower. For example, prices in Las Vegas have plunged nearly 60% compared to pre-recession rates, with the downward trend still in effect.
For the housing market to bounce back, there needs to be movement and activity. Yet, depreciating prices and negative equity create a state of inertia, exacerbating the housing issues at hand. Ultimately, this stagnancy deepens the housing market’s problems.
