Inquiring minds are looking at a report showing great news in that there are fewer homes underwater. Normally this would be welcomed news…except that the reason for this is that so many homes were foreclosed on that it significantly lowered the number of underwater homes:
About 10.8 million homes, or 22.5 percent of those with mortgages, were “underwater” as of Sept. 30, the Santa Ana, California-based real estate information company said in a report today. That was down from 11 million, or 23 percent, at the end of June, the third straight quarterly decline.
Falling property values and unemployment near 10 percent have spurred a surge in foreclosures. The number of homes offered in foreclosure auctions averaged 110,000 a month in the third quarter compared with about 98,000 in the same period a year earlier, said Mark Fleming, CoreLogic’s chief economist.
“There are two ways to reduce negative equity,” Fleming said in a telephone interview today. “Price appreciation or disposition, which means people getting taken out of their homes. At the moment, there’s more disposition.”
In an almost throw-away:
The asset value of real estate held by U.S. households fell by $649 billion in the third quarter to $16.6 trillion, the Federal Reserve said Dec. 9. Home prices may drop as much as 11 percent more through the first quarter of 2012 before finding a bottom, according to a Morgan Stanley report last week.
“House prices are going to fall more next spring and that will bring more negative equity,” Fleming said.
What is important to note is that 11 percent is a national weighted average. But most of the decline will happen in California where 58 percent of all Alt-A loans occurred.
Between them coming due and the problems of the state, the only question is: What floor are we on?
If we take a 17-18 percent rate of foreclosure, then we will see a major decline in prices. In OC, a Surviving California prediction is probably about 40 percent (in the Alt-A areas).
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