Number of home owners underwater down

IRVINE, Calif. – Sept. 5, 2013 — RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released its U.S. Home Equity & Underwater Report for September 2013, which shows that while 10.7 million residential homeowners nationwide owe at least 25 percent or more on their mortgages than their properties are worth, another 8.3 million homeowners are either slightly underwater or slightly above water, putting them on track to have enough equity to sell sometime in the next 15 months — without resorting to a short sale.

The 8.3 million include homeowners with a loan to value (LTV) ratio from 90 to 110 percent, meaning they have between 10 percent positive equity and 10 percent negative equity. These homeowners represented 18 percent of all U.S. homeowners with a mortgage as of the beginning of September.

The 10.7 million residential properties with an LTV ratio of at least 125 percent represented 23 percent of U.S. residential properties with a mortgage — down from 11.3 million deeply underwater properties representing 26 percent of all residential properties with a mortgage in May 2013 and down from 12.5 million deeply underwater properties representing 28 percent of all residential properties with a mortgage in September 2012.

“Steadily rising home prices are lifting all boats in this housing market and should spill over into more inventory of homes for sale in the coming months,” said Daren Blomquist, vice president at RealtyTrac. “Homeowners who already have ample equity are quickly building on that equity, while the 8.3 million homeowners on the fence with little or no equity are on track to regain enough equity to sell before 2015 if home prices continue to increase at the rate of 1.33 percent per month that they have since bottoming out in March 2012.

“In addition, nearly one in four homeowners in foreclosure has at least some equity, giving them a better chance to avoid foreclosure without resorting to a short sale — assuming they realize they have equity and don’t miss the opportunity to leverage that equity,” Blomquist added. “Even homeowners deeply underwater have reason for hope, with about 150,000 each month rising past the 25 percent negative equity milestone — although it will certainly take years rather than months before most of those homeowners have enough equity to sell other than via short sale.”

Other high-level findings from the report:
More than 126,000 properties in the foreclosure process nationwide had an LTV of 100 percent or lower in September, representing 24 percent of all homes in the foreclosure process. States with the highest percentage of foreclosures with equity included Oklahoma (54 percent), Hawaii (51 percent), New York (47 percent), and Texas (46 percent).
States with the highest percentage of deeply underwater homes (LTV of 125 percent or higher) included Nevada (46 percent), Illinois (40 percent), Florida (40 percent), Michigan (38 percent), Rhode Island (34 percent), and Ohio (31 percent).
Metro markets with the highest percentage of homes with resurfacing equity (LTV from 90 to 110 percent) included Omaha, Neb., (29 percent), Colorado Springs, Colo., (29 percent), Tulsa, Okla., (29 percent), Little Rock, Ark., (28 percent), and Raleigh, N.C. (28 percent).
Nationwide 7.4 million homeowners with a mortgage had 50 percent equity or more, representing 16 percent of all homeowners with a mortgage. Metro markets with the highest percentage of homeowners with at least 50 percent equity included Honolulu (36 percent), San Jose, Calif., (35 percent), Poughkeepsie, N.Y. (30 percent), Pittsburgh (29 percent), San Francisco (29 percent), and New York (27 percent).
Local broker perspectives
“Negative equity will always hamper the housing market from making a strong recovery; however, the amount of homeowners with negative equity is shrinking,” said Emmett Laffey, CEO of Laffey Fine Homes International, covering Long Island and the five boroughs of New York City.  “New York metro home prices are increasing at a rate of about 1 percent per quarter and thousands of homeowners will now be in a position to sell and take some equity with them post-closing.”

“The housing market in Oklahoma City and Tulsa continues to improve, with a majority of homeowners having at least some equity in their homes,” said Shel Detrick, CEO of Prudential Detrick/Prudential Alliance Realty, covering the Oklahoma City and Tulsa markets. “If home prices continue to rise, close to one-third of all homeowners in the Oklahoma City metro area will have enough equity to sell their homes in the next year, which is exciting in this inventory-sparse market.”

“Due to the increased market demand and low inventory levels we have experienced during much of 2013, negative equity situations have only been noted in isolated circumstances in many areas of Ohio,” said Michael Mahon, Executive Vice President of HER Realtors, covering the Columbus, Cincinnati and Dayton markets in Ohio.  “This trend will continue to add more buyers and sellers into a positively increasing equity market in months to come, as well as an increased rate of recovery across Ohio for 2013.”

 “Negative equity certainly impacts a homebuyer's decision to sell, and we expect sellers to come off the fence as prices rise and equity is gained back,” said Steve Roney, CEO of Prudential Utah Real Estate.  “This will provide added momentum to the recovery as inventories rise and buyers have more options.”

“Negative equity continues to be an issue in the Reno-Sparks marketplace, however the situation is improving due to strong price increases,” said Craig King, COO of Chase International, covering the Reno and Lake Tahoe markets.  “The effect of rising home prices and homeowners with resurfacing equity are both encouraging trends. We believe some of these individuals are starting to show up in our sales activity right now as part of a move-up market.  There has been no move up market in the area since 2006 so we are excited about that.”

“For the past few years, many people have been unable to sell their homes and upgrade due to lack of equity or in some cases negative equity,” said Rich Cosner, president of Prudential California Realty, covering Orange, Riverside and San Bernardino counties in Southern California. “With the tremendous growth in equity over the past year, many homeowners are now able to sell their homes and re-buy, which is a very positive outcome for the real estate market.”

“Many homeowners have been predisposed to having negative equity for several years and may not realize that if they put their home on the market at the right price they could sell for a favorable outcome,” said Dan Forsman, president and CEO of Prudential Georgia Realty.  “The market is starving from a lack of inventory, but as the dial of the housing market moves towards positive and home appreciation continues to climb, there will certainly be an increase in the supply of properties.”

Report methodology
The RealtyTrac U.S. Home Equity & Underwater report provides counts of residential properties based on several categories of equity — or loan to value (LTV) — at the state, metro and county level, along with the percentage of total residential properties with a mortgage that each equity category represents. The equity/LTV calculation is derived from a combination of record-level open loan data and record-level estimated property value data, and is also matched against record-level foreclosure data to determine foreclosure status for each equity/LTV category.

Definitions
Deeply underwater: Loan to value ratio of 125 percent or above, meaning the homeowner owed at least 25 percent more than the estimated market value of the property.

Resurfacing Equity: Loan to value ratio from 90 percent to 110 percent, meaning the homeowners had anywhere from 10 percent positive equity to 10 percent negative equity.

Equity Rich: Loan to value ratio of 50 percent or lower, meaning the homeowner had at least 50 percent equity.

Foreclosures w/Equity: Properties in some stage of the foreclosure process (default or scheduled for auction, not including bank-owned) where the loan to value ratio was 100 percent or lower.

Report License                                                                              
The RealtyTrac U.S. Foreclosure Market Report is the result of a proprietary evaluation of information compiled by RealtyTrac; the report and any of the information in whole or in part can only be quoted, copied, published, re-published, distributed and/or re-distributed or used in any manner if the user specifically references RealtyTrac as the source for said report and/or any of the information set forth within the report.
Data Licensing and Custom Report Order
Investors, businesses and government institutions can contact RealtyTrac to license bulk foreclosure and neighborhood data or purchase customized reports. For more information contact our Data Licensing Department at 800.462.5193 or datasales@realtytrac.com.

About RealtyTrac Inc.
RealtyTrac (www.realtytrac.com) is the leading supplier of U.S. real estate data, with more than 1.5 million active default, foreclosure auction and bank-owned properties, and more than 1 million active for-sale listings on its website, which also provides essential housing information for more than 100 million homes nationwide. This information includes property characteristics, tax assessor records, bankruptcy status and sales history, along with 20 categories of key housing-related facts provided by RealtyTrac’s wholly-owned subsidiary, Homefacts®. RealtyTrac’s foreclosure reports and other housing data are relied on by the Federal Reserve, U.S. Treasury Department, HUD, numerous state housing and banking departments, investment funds as well as millions of real estate professionals and consumers, to help evaluate housing trends and make informed decisions about real estate.

Media Contacts:
Jennifer von Pohlmann
949.502.8300, ext. 139
jennifer.vonpohlmann@realtytrac.com

Ginny Walker
949.502.8300, ext. 268
ginny.walker@realtytrac.com

Brittney Marin
949.502.8300, ext. 107
brittney.marin@realtytrac.com

Data and Report Licensing:
800.462.5193
datasales@realtytrac.com


realtytrac.com

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.

The selling process

The following is an outline of the selling process.  It covers from the time that you are estimating the value of your home to the closing.

This outline is very simple.  Each step is much more complicated than the brief description implies.  Your real estate agent will cover many of the details for you and especially those that are of the most interest to your case.

Market determination

• History - Research the real estate market in your community in the last couple of years.  

• Comparables - This is a comparison of your property to other similar properties that have sold in the last 3-6 months.  The profile of the comparables should be as close to your home in every way possible.

• Unique differences - It is important to understand what is different about your home, for better or worse.

• Other markets - Take a quick look at other areas of town to see what is going on in those communities and the price your house may bring if you lived there.

• Current listings - Never price your home based on current listings in your market.  But, to examine a list of other houses that will be on the market at the same time will give you some idea of what the potential buyer is looking at before and after they see your home.

• Showings - Take a tour of houses that are similar to your house before you list.  When you do a walk through yourself you have a better understanding of staging, pricing and the competition.

• Estimated cost and proceeds - Make sure your agent develops a good faith estimate of what the costs are to sell your house and what the proceeds will be.

Listing agreement - Here is a list of documents that you may be required to sign:

• Agency Disclosure - This is a document that is required by regulation.  It explains the responsibilities of the agent and the agency.

• Tax exempt - Rarely is this true, but you may be exempt from transfer taxes if your home is worth a percentage less than when you purchased the home.  It is worth the consideration.

• Top ten questions - What has happen in your life financially and legally will affect the outcome of the sale of your house.  It is good to examine the questions to make sure you understand the impact the issues may have.

• Showing instructions - a form that outlines when you will allow your house to be shown.  

• Exclusive Right to sell - Simply states that the agent is to work in your behalf but only with your approval throughout the entire process.

• Realcomp profile form - This form details the features of your house.  

• Seller’s disclosure - This form details the problems your house may have.

• Lead based paint - If your house was built before 1978 you need to inform the potential buyer that there may be lead based paint used and that you may or may not know about it.  This form is required by regulation.

• Title order form - This allows the title company of your choice to order the title work when the house is sold.

• IRS form - It informs the IRS that you have sold your home.   

• Pay off authorization - This allows the title company to work with your mortgage provider to pay off the mortgage when the house is sold.

• Homeowner’s safety letter - This states that you will keep your home safe for people to walk through.  

• Home warranty form - This informs the potential buyer that you are or are not providing a home warranty after the sale.

• Winterization form - If the house is vacant, or will be during the winter, and you decide not to keep it heated, you will need to winterize the house.  (It is advised you don’t winterize because a cold house doesn’t show well.)

• Certificate of non foreign status - States that you are a citizen of the United States.      

• Photo authorization - Allows the agent to take pictures and use them to market your home.

• Extra Keys - Documents that you are sharing keys with the agent.    

• Association request form - If you have an association, this will allow the agent and agency to request fees that may need to be paid at closing.

• Other - Depending on all the other things about your house and property, there may be other forms that need to be completed and signed.

Showings

• Showing instructions - You specify when your home will be shown to potential buyers through a licensed agent.  

• Agent request - When an agent wants to show your house, he or she will notify your agent’s office.  The office will make sure they are a qualified agent in good standing and note the date and time.

• Seller notification - The agency will call, email or text you about the date and time that the house will be shown.  There is a two hour window in most cases, allowing you enough time to clean up and leave the house.

• Showing the home - After the home is shown, a request is sent to the agent for feedback.

Offer

• Purchase agreement - This is a form submitted to the seller from a potential buyer detailing the price and conditions for purchasing the house.

• Lead based paint disclosure - The form must be submitted with an offer and signed by the potential buyer.

• Seller’s disclosure - The form must be submitted with an offer and signed by the potential buyer.

• Agency disclosure - This form must be signed by the potential buyer that indicates that the buyer’s agent has the right to work on the buyer’s behalf.  

• Inspection contingency in purchase agreement - This contingency allows the buyer to arrange for an inspection of the property by a home inspector of his or her choice.  When the report is issued, the buyer can accept the condition of the property, ask the seller to repair issues, ask for a reduction in price, ask for money back at the closing or allow the buyer to walk away from the transaction.  There are strict time lines attached to this contingency that both seller and buyer agree to.

• Mortgage contingency in purchase agreement - This allows a safety net for the buyer so that if he or she can’t find a mortgage, they can walk away.  It is is a cash deal there usually will not have a mortgage contingency.

• Addendums - There may be many other addendums or contingencies built in to any purchase agreement.  It all depends on how it is being financed, what the use of the property may be after the buyer takes possession, when the buyer takes possession and other things.  All of the them are to be read and understood how they impact the final deal.

Counter offer

• Price - You can counter offer on the price if you think the house is worth more than what the buyer is offering.

• Contingencies and addendums - Changes can be made to any or all the contingencies and addendums.  Most of the changes should be considered based on the activity of showings and other offers.

Offer acceptance

• Final sign - once all the issues have been worked out, the seller is expected to final sign the purchase agreement and move on to closing.

Inspection

• Report - it is wise to request a copy of the inspection report to document what ever response the buyer has to the report.  As is above, the seller can respond to any changes the buyer submits.

Appraisal

• Comps - the seller’s agent will provide comps to the appraiser and will meet the appraiser at the home to answer any questions he or she may have.  The law outlines the relationship between the seller, their agent, the buyer’s mortgage provider and the appraiser.

• Report - A detailed report will be issued by the appraiser.  If the appraised value is at a level that is consistent with the buyer’s plans, there is no problem.  If lower, the buyer needs to come up with a larger down payment, the seller may be asked to give on the price or there may be some combination of both.

Closing

• HUD statement - at the heart of the entire closing process is the HUD statement.  It details all the financial issues from the purchase agreement, the addendums and the mortgage company, is using one.  All other documents in the closing flow from the statement, requirements from the mortgage company, legal requirements and other addendums in the agreement.

Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan.  He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods.  Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce.  You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.