Effective Negative Equity and its Impact on the Real Estate Market

<div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5fUuy-mvDt0gMQd5X7fXconjnQdP3U0P9HZavHfV3fpVW-cRlQR3QLmmIaA6Mp_Dl4rcziHVTe0uAxHFB31y0WP1p2UtSmftk8Kac7ELSiG4V4bpbNSvpmVznz0mSOAVIGkil_R8I-X0/s1600/Effective+Negative+Equity+and+its+Impact+on+the+Real+Estate+Market.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="228" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5fUuy-mvDt0gMQd5X7fXconjnQdP3U0P9HZavHfV3fpVW-cRlQR3QLmmIaA6Mp_Dl4rcziHVTe0uAxHFB31y0WP1p2UtSmftk8Kac7ELSiG4V4bpbNSvpmVznz0mSOAVIGkil_R8I-X0/s1600/Effective+Negative+Equity+and+its+Impact+on+the+Real+Estate+Market.png" width="320" /></a></div> <br /> <div class="MsoNormal" style="margin: 0in 0in 10pt;"> <span style="font-family: Calibri;">The reductions in the number of homes with underwater mortgages have been encouraging, with reductions in negative equity, each of the last seven quarters. However, effective negative equity has remained high. While underwater mortgages have dropped to below 20%, as of the fourth quarter of 2013, according to Zillow research, the effective negative equity remains at 37.6%.</span></div> <div class="MsoNormal" style="margin: 0in 0in 10pt;"> <b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">What is Effective Negative Equity?</span></b></div> <div class="MsoNormal" style="margin: 0in 0in 10pt;"> <span style="font-family: Calibri;">Effective negative equity includes all homes where the mortgages are higher than 80% of the value of the home. This has been deemed effective negative equity because, while the homeowner does not owe more than the home is worth, they are effectively still underwater. They do not have enough equity to pay for the costs associated with selling a home and still have a down payment for the next home. </span></div> <div class="MsoNormal" style="margin: 0in 0in 10pt;"> <span style="font-family: Calibri;">The impact of effective negative equity is significant in the slow recovery of the real estate markets because consumers are not able to sell their homes and remain homeowners with the purchase of another home. This reduces inventory and impacts homeowners who sell they homes and then must become renters.</span></div> <div class="MsoNormal" style="margin: 0in 0in 10pt;"> <b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">The Impact of Effective Negative Equity</span></b></div> <div class="MsoNormal" style="margin: 0in 0in 10pt;"> <span style="font-family: Calibri;">In the years leading up to the real estate market crash in 2008, millions of homeowners were purchasing homes with minimal or no down payments. Today lenders are not as anxious to lend, and have stricter guidelines for lending. This is partly due to additional regulation and oversight along with the high level of losses incurred by banks and lenders. The result is that homeowners are now required to come up with larger down payments. Gone are the days of buying a home with no money down. <span style="mso-spacerun: yes;"> </span>This makes the effective negative equity numbers more problematic. </span></div> <div class="MsoNormal" style="margin: 0in 0in 10pt;"> <span style="font-family: Calibri;">With millions of Americans finding themselves or someone they know in these circumstances, the impact has also created an image problem with regard to home ownership as a whole. There was a time when families would scrape together a down payment at any cost, because it was understood that the home would appreciate and the home would build wealth.</span></div> <div class="MsoNormal" style="margin: 0in 0in 10pt;"> <span style="font-family: Calibri;">When consumers are confident that a home is an investment, home buyers are plentiful. Today that level of confidence has been degraded through several years of declining values and watching friends and neighbors lose their homes to foreclosure, short sales and the inability to sell, due to negative equity.</span></div> <div class="MsoNormal" style="margin: 0in 0in 10pt;"> <span style="font-family: Calibri;">Increasing home values are helping the real estate market along, but progress is slow. Lower down payments, as with FHA loans, are providing opportunities for buyers to purchase homes with a minimum of 3.5% down instead of 20%. Lenders loosening up requirements will provide opportunities for more buyers to have access to home ownership. As the market improves, buyer confidence will also create more demand.</span></div> <div class="MsoNormal" style="margin: 0in 0in 10pt;"> <span style="font-family: Calibri;">Some of the hardest hit states like Florida, California and Arizona have seen sharp spikes in values because the effective negative equity has created a housing shortage. It is anticipated, according to Zillow forecasting models, that it will be several more years before the real estate market will fall within normal statistical ranges. Until that time, working with homeowners to meet their buying and selling needs will continue to challenge real estate professionals nationwide.</span></div> <span style="font-family: Calibri;"><span class="fblongblurb">Get your share of the $1.5 trillion in Adjustable Rate Mortgages scheduled to reset this year! </span>Imagine having up to a 20% funding rate at a low, cost effective price per lead! With our ARM plus leads, you can. Get in touch with </span><a href="http://www.armsource.com/"><span style="color: blue; font-family: Calibri;">ARM Source</span></a><span style="font-family: Calibri;"> today!</span><br />

Effective Negative Equity and its Impact on the Real Estate Market

The reductions in the number of homes with underwater mortgages have been encouraging, with reductions in negative equity, each of the l...

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