If you owe more on a property than it is worth, your mortgage is said to be under water. You have negative equity. According to an article in Reuters published on October 31, 2008, across the U. S. about 18% of mortgages are under water, but the problem is very regional. (Note that since some houses are fully owned, the percentages cited below are not of total homes but of total mortgaged homes.
According to a CNN report as far as under water mortgages are concerned in Iowa we are
- not in the10 worst (NV, MI, AZ, FL, CA, GA, OH, CO, NH, TX which range from 48% to 16%) and we are
- not in the 10 best (NJ, NM, WA, OR, AL, CT, MT, PA, HI, or NY which range from 9% to NY’s 4%).
We’re in the middle. But remember any homes that are paid up are not reflected in these numbers, and many older Io
wans own their homes.
The negative equity problem is caused by a continuing drop in housing prices in some markets. The expectation is that the decline will continue before it improves. The fraction of mortgages under water is highest in the Southwest which reflect the sharp decline in house prices over the past year through August. Equity evaporates.
- Las Vegas -30.6%
- SanFrancisco -27.2%
- LosAngeles -26.7%
- SanDiego -25.8%
This is in contrast to housing price declines in the Midwest.
- Minneapolis -13.8%
- Chicago -9.8%
- Cleveland -6.6%
A few markets including Des Moines have shown minimal declines in housing prices.
- Charlotte -2.8%
- Dallas -2.7%
While the time frame is not exactly comparable, Des Moines housing prices are said to be similar to Charlotte and Dallas according to WHO-TV.
- Des Moines -3%
Some sources say Des Moines and West Des Moines housing prices are rising (Zillow.com).
- DesMoines +5.1% (November 2007 – November 2008)
- West Des Moines +2.7%
And they are rising even more according to R. Michael Knapp of Iowa Realty who reported in The Des Moines Register an increase of 6% in median Des Moines housing prices for the second quarter (4/1 – 7/1/2008) while the rest of the nation averaged a -7.6% (decline).
Whatever the exact numbers, we are doing relatively well. Lucky us!
The response of JPMorgan Chase & Company to owners faced with negative equity was to offer to modify an estimated $70 billion in mortgages to keep 400,000 customers out of foreclosure. Good idea.
photo by flickr by Jay Galvin
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There have been pretty scary reports about underwater mortgages and how they are affecting people all over the country. IT’s important to gain as much knowledge as you can about your mortgage loan before entering into an agreement.
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