Home values rise; underwater housing problem dissipating

Rising home prices helped many homeowners get right-side up on their mortgages.

But more than 12 percent of U.S. homes remain “underwater” — a term used to indicate the owner owes more on the house than its worth — according to CoreLogic, a company that provides housing data and analysis.

Underwater homes make it difficult for owners to sell their houses because the owners might have to cough up cash to make the sale happen. Also, the owners do not have home equity to help buy a new home.

The problem, however, is starting to get better, said Mark Fleming, the chief economist for CoreLogic. 

“We’re down to 12 percent for national negative equity, share of mortgages,” Fleming said. “We estimate normal to be about 5 (percent), so we’re still well elevated. Not long ago it was 20 percent. That’s a huge improvement and it’s been a very quick improvement.”

Fleming said rising home values is the biggest reason for the decrease in underwater homes. For those in underwater situations, Fleming said patience is a virtue.

As homeowners pay off more and more of the principal for the mortgage, the combination of decreases in the amount owed with rising values should clear out the glut, he said.

“Time tends to heal all ills,” he said. “Depending how underwater you are, it might take longer, but over time as prices appreciate, you’ll get back above water.”

Fleming said those homeowners who do not want to move and can afford their monthly mortgage payments have little to worry about for the time being.

“You might not feel great about the fact that your house is underwater relative to your loan amount, but it doesn’t affect your day-to-day. It’s only if you wanted to move,” Fleming said.

Those who do have to move for a job or family issue could rent out their home to continue to build equity while making the move, Fleming said. 

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