Trapped in Negative Equity

Home sales around the country are on the rise.

But finding a house to buy could be a big problem. The inventory of homes listed for sale is at the lowest point in more than a decade.

So why aren’t more properties coming on the market?

Housing economist Mark Fleming thinks it’s because many homeowners just owe too much to comfortably sell.

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“Almost half of all mortgage loans today are under-equitied — they have less than 20 percent,” Fleming, chief economist for housing and mortgage analyst CoreLogic Inc., said recently.

“These people aren’t supplying their homes to the market because they are underwater or under-equitied.”

Fleming, who spoke to a meeting of the Mortgage Bankers Association in Grapevine, Texas, said it will be years before some homeowners who purchased before the recession have enough of a stake in their house that they can trade up to another property.

Even though home prices are increasing in most U.S. markets, it will take a while before homeowners can net enough from the sale of their current home to have a down payment for another purchase.

“Equity is one of the primary constraints to people buying and moving,” Fleming said.

CoreLogic estimates that 22 percent of mortgage holders nationwide owe more than the value of their properties. And the situation is worse in places in Nevada, Arizona and Florida, where more than a third of homeowners with a loan are upside down, according to CoreLogic.

“Negative equity will cast a shadow over the housing market for years to come,” Fleming said.

Rising home values will eventually cure the situation, he told members of the Washington, D.C.-based mortgage group.

Read more at: http://www.chicagotribune.com/classified/realestate/foreclosure/sc-cons-0314-realestate-listings-20130316,0,2187410.story

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