Mortgages to Exceed Value until 2015 to 2020

Posted on April 6, 2010 by IC N in Residential
Mortgages to Exceed Value until 2015 to 2020
First American CoreLogic has estimated that even in the healthier markets that are now beginning to heal from the steep price drops of the last three years, homeowners currently with underwater mortgages will continue to have mortgages that exceed value until late 2015.
By the 4th quarter of 2009 First American CoreLogic estimated that over 11.3 million residences with mortgages had negative equity. That’s 24% of all U.S. mortgages.
By using a subset of mortgage holders, CoreLogic was able to project the length of time it will take for the average homeowner to again reach positive equity. The typical borrower will see the problem disappear toward the end of 2015 or early 2016, while those in severely depressed markets such as Detroit may not see positive equity again until 2020.
Because negative equity is highly associated with mortgage default, this is a strong indication that those of us investing in Short Sales will see a booming business for at least the next five or six years.
There are Buyers for Luxury Homes
While for most Investors the homes that are most readily purchased as rentals and first homes are the most plentiful and the easiest to sell quickly, there is a resurgence in the luxury home market that may present an opportunity for Investors in certain markets.
The National Association of Realtors reports that the sale of homes valued at $1 million and higher increased 38% in February over the same period the year before. The reasons are low mortgage rates, loosened credit markets and more cash buyers ready to bet that these homes will increase in value in the future.
A 30 year fixed jumbo mortgage is currently at 5.58% for a luxury home loan, while a year ago it was nearly 7%. Because consumer confidence is returning in this high end market, more lenders are offering mortgage products to meet the demand. There are also many cash buyers in the high end market, especially in attractive retirement and second home markets.
Florida Looks for Money to Clear Foreclosure Backlog
Florida, like other judicial foreclosure states, is experiencing a serious backlog of cases and needs additional funds in order to clear the log-jammed court dockets. The Florida Courts Administration has asked the legislature for an extra $9.6 million in order to hire more case managers and judges in order to clear the current glut of lis pendens and final judgment cases in foreclosures.
There are an estimated 500,000 cases awaiting adjudication in Florida, and it normally takes a year to 14 months to clear these cases. It is estimated that only 18% of the foreclosure cases in Miami have been completed.
The Florida Bankers Association has introduced a bill which would allow non-judicial foreclosures in the state unless the homeowner requests a court appearance. The non-judicial foreclosure could reduce the process to 90 days.
Better News on Home Values
The Case-Schiller Home Prices Index showed another positive jump for the eight straight month in January. The seasonally adjusted prices increased by .4% for the 10 city index and .3% on the 20 city index. Both showed a decline on the unadjusted indexes due in part to the bad weather in many parts of the country.
On the negative side, Charlotte, Las Vegas, Seattle, and Tampa experienced prices that reached new index lows. In Tampa, prices are down 42% from their high levels, and Las Vegas has troughed at 55.8% from its peak. On the more positive side, San Francisco and Minneapolis are 15.2 percent and 12.9 percent ahead of their lowest points respectively.
Case-Schiller economists warn, however, that some of the forces that caused home values to start to rise are on course to be reversed, particularly with the end of the first time and move-up homebuyer tax credits. It is hard to say whether price gains can be sustained without these programs.
Have a great day!
Bob Massey