What's Recovering Is The High End Of Housing

Sadly wage not growing so does anyone see a resolution to this "underwater" problem other than time?   From Forbes:

A total of 9.7 million American households still have “underwater” mortgages, meaning they owe more on the home than it is currently worth. Homes in the lowest price tier are most affected, according to data released today from Zillow.

Thirty percent of homes in the bottom price tier are in negative equity, while only 18.1% of homes in the middle tier and 10.7% in top tier are underwater, according to Zillow’s Negative Equity Report. Homes are defined as top, middle, or bottom tier based on their estimated value compared to the median home price for that area. (Nationally, the median price in the top tier is $306,700; middle tier, $163,400; bottom, $98,400.)

Overall, 18.8% of homeowners were underwater during the first quarter of 2014. 

Zillow’s figures for homes with negative equity are higher than other recent reports looking at the same problem. This is in part because the Zillow report captures the current amount a homeowner owes on a mortgage via data from Transunion, while other reports estimate the current loan balance based on public records. But there are also differences in the way various data companies estimate a home’s current value. Different methodologies lead to different findings. For example, CoreLogic’s most recent report shows far fewer homes with negative equity than Zillow’s: nearly 6.5 million homes (13.3% of mortgaged propertes) were in negative equity at the end of 2013, according to CoreLogic. That’s 3 million less than the negative equity homes Zillow is counting.

What’s particularly significant about the Zillow report is that it underscores a reason for the low prevalence of first-time homebuyers in the market: many owners of less expensive homes can’t afford to sell.

“The unfortunate reality is that housing markets look to be swimming with underwater borrowers for years to come,” said Zillow Chief Economist Dr. Stan Humphries via a release. “It’s hard to overstate just how much of a drag on the housing market negative equity really is, especially at the lower end of the market, which represents those homes typically most affordable for first-time buyers. Negative equity constrains inventory, which helps drive home values higher, which in turn makes those homes that are available that much less affordable.”

Nationally, according to Zillow, negative equity has declined for eight consecutive quarters, but it ground to its slowest pace yet in Q1 2014. In the first quarter of 2013 negative equity stood at 25.4%; by Q4 2013 it was at 19.4%. The pace of home value growth has also slowed, to 5.7% in Q1 2014, down from 6.6% at the end of Q4 2013. Zillow forecasts that the national negative equity rate will decline to 17% of all homeowners with a mortgage by the first quarter of 2015.

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