Fewer "underwater" homeowners, but housing outlook still murky
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Kai Ryssdal: We got one of those economic reports this morning that seems like good news, until you dig just a little bit deeper. Fewer people are underwater on their homes; that is, owing more on their mortgages than their houses are worth. A company called CoreLogic says the percent of homeowners in that predicament fell half a percent in the third quarter. If only the story were that simple.
Marketplace’s Mitchell Hartman explains.
Mitchell Hartman: More than one in five homeowners nationwide are still “underwater.” Ted Gayer at the Brookings Institution says if more of them were actually swimming toward the surface, that would be great.
Ted Gayer: You would ordinarily like to see that happening from price appreciation.
As home prices go up, there are fewer foreclosures. People can sell without a bank’s permission to take less than what they owe. And they can move for better jobs.
Problem is, home prices aren’t going up. In fact they’ve started falling again — adding to people’s negative equity, says David Blitzer at Standard & Poors.
David Blitzer: The deeper one is in the hole in terms of negative equity, the more likely the house is to be foreclosed on. You’re peeling off the most extreme cases.
And that’s why there are fewer homeowners underwater now. The ones in the worst shape have lost their homes to foreclosure, and drowned. Economist Mark Fleming at CoreLogic doesn’t see these waters getting any less dangerous.
Mark Fleming: House prices will recover very, very slowly over the coming years, so this is a drag on the housing market and the economy for a number of years to come.
Ted Gayer at Brookings says it’ll be a painful process to clear away all the floundering homeowners.
Gayer: That means a lot of people relocating, being foreclosed upon, short sales, getting into homes that they can afford the mortgages or getting into renters. And it also means a lot of correction on balance sheets of banks. So it’s a complicated process.
Today’s report says half of underwater homeowners owe at least 25 percent more than their home is now worth.
I’m Mitchell Hartman for Marketplace.
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