Top 5 Underwater States Regarding Mortgages

November 10, 2008

in Real Estate News

sweetie_smallAccording to The Associated Press, Nevada, Michigan, Florida lead ‘underwater’ list:
State
No. of mortgages
percent underwater
Nevada
609,577
47.8%
Michigan
1,145,572
28.6%
Arizona
1,287,076
29.2%
Florida
4,248,470
29.2%
California
6,461,981
27.4%

It is said that almost half of Nevada homeowners with a mortgage owe more to the bank than their homes are worth. Add in the homeowners in the same situation in California, Arizona, Florida, Georgia and Michigan, and together they account for nearly 60 percent of all homeowners who are “underwater” on their mortgages. Nationwide, it’s about 1 out of 5 homeowners who are underwater.

Some experts predict the problem will get much worse, others feel we are at the bottom. Remember real estate is localized, so some areas just might be at their bottom. In my opinion, I believe the worst is yet to come (in a majority of the states). My area “topped” in June 2005, where as NY topped around Dec. 2007. Buyers who got the adjustable mortgages (or negative amoritization loans) are seeing their payments adjust. And depending on the terms (1 year, 3 year, or 5 year adjustable), will depend on when the homeowner/investor gets into trouble with the higher payments.

According to Nouriel Roubini: Nationally, home prices are already down about 20 percent from their peak in mid-2006. By the time the housing market hits bottom, prices may be down 40 percent from the top, leaving 40 percent of homeowners underwater, according to Nouriel Roubini, economics professor at New York University.

“There is a huge incentive to walk away from your mortgage,” said Roubini, who has attracted attention for his gloomy – and accurate – predictions of the U.S. financial market meltdown. He gave no forecast for when the real estate market would bottom out.

Think of it this way…the investor can’t refinance to get a lower payment because their property won’t appraise…they owe more than it’s worth and they can’t afford to bring the difference to closing. The bank won’t work with them until they are behind, and then if they get behind, it will hit their credit, therefore not allowing them to refinance anyway! If your credit is going to be ruined, because of late payments, why not just walk away?? I’m not saying walking away is the right thing to do, but what other options does the person have? The bailout plan is not going to be able help everyone.

The problem is much worse in suburban neighborhoods where builders flooded the market with new homes and buyers put down small, or no, down payments. Look at Atlanta (I lived there for 12 years so I am very familar with that market). When I moved to Florida in 2004 there were about 3000 homes hitting some stage of Foreclosure every month. That number has skyrocketed to over 7000 per month! Back then there were not enough investors to buy the ones that actually were sold on the courthouse steps.

Looks like there will be some incredible buys for investors and even those who want to purchase a primary residence (or 2nd home in my area). My advice would be to make sure you work with a Realtor who is familiar with short sales and foreclosures.

For more information about real estate along the Emerald Coast visit my website.

Debbie James
850.450.2000

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{ 2 comments… read them below or add one }

Mortgages November 11, 2008 at 7:59 pm

good information. Thanks for this article.

Reply

Jacksonville FL Homes December 19, 2008 at 2:41 am

Wow I didn’t realise the numbers were that high, but it really doesn’t suprise me come to think of it. Definately leading to lots of short sales around here in Jacksonville!!

Working Florida Short Sales is the only way we can make a living down here in these trying times.

Mike Linkenauger
First Coast Realty Associates
Jacksonville FL Condos

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