Nearly 25 percent of all homeowners with home loans in the U.S. had negative home equity in the second quarter, according to Seattle-based economist Stan Humphries. He added that job losses and more foreclosed for sale properties will push up the number of underwater borrowers to about 30 percent by the middle of 2010.
Recently, Deutsche Bank also released the results of its study which concluded that the percentage of underwater mortgage borrowers may jump to approximately 50 percent of all U.S. home loans before the housing market recovers.
The Deutsche Bank analysts estimated that around 25 million housing units, which are about 48 percent of all mortgaged residential properties, will be worth much lower than their mortgages in the first quarter of 2011 because of declining home prices.
According to Humphries, the median price for single-family detached homes nationwide dropped to $186,000 in the second quarter, representing a 12 percent decrease from the median price in the second quarter last year and the tenth consecutive quarter that the median price dropped.
The economist stated that the increasing negative equity rate will cause more foreclosures and that the housing market will not bottom out this year, but in the middle of 2010.
In the second quarter, according to Humphries, home prices declined in nearly 90 percent of 161 metro areas surveyed by his team. By June 30, twenty-percent of all homeowners with home loans had negative home equity.
Despite some positive signs seen in the slowdown in home price declines and job cuts, many housing analysts still doubt an impending housing recovery this year. In July, payrolls dropped by 247,000, a substantial decrease from the 443,000 payroll drop in June, according to the Labor Department.
Home price levels in 20 major metro areas surveyed by Standard & Poor's/Case-Shiller fell by 17 percent in May 2009 compared to May 2008, considered by economists as the smallest decline in 9 months.
According to a report on nationwide real estate sales and inventories in June, there are 3.8 million unsold homes nationwide and it would take 9.4 months to sell all the homes at the current home sales pace. During the 6-year period ended 2005, the average rate for home inventory turnover was 4.5 months. Over 18.7 million houses also remained vacant in the second quarter, according to the Census Bureau.
These factors - unemployment, foreclosures, price declines, vacancies and unsold housing inventories - are putting more mortgages into negative equity.
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