Watch Out For Negative Equity

Larry O. Doss Thursday, December 10, 2009

Do you own a home which has negative equity and are wondering how this occurred? The answer is simple. Negative equity occurs when you purchase a home using a home loan and the home prices begin to decline due to economic slowdown. The home value now decreases below the value principally on mortgage. This condition is called negative equity. It can be calculated by taking the value of the home, less the balance on the remaining loan.

An important aspect in the performance of home loans in the third quarter of 2009 was the high resale of foreclosures. This came up to one fifth of the total home sales in the real estate market. Also 26.5% of homes were sold for prices lower than what the original owner had paid.

Year after year, the prices of homes are declining. The recent fall was recorded at 6.9% reaching $194,000. The percentage of homes in negative equity was read to 21% in the third quarter, unlike 23% in the second quarter. It was when home values stabilized that many homes were also foreclosed in the same period. The third quarter readings show a dramatic decline in the negative equity conditions. This decrease in the percentage of home owners with negative equity is a positive sign to the economy. This is directly related to the stabilization of home prices in the next two quarters. This also indicates the percentage of home owners who have lost their homes to foreclosures in the second and first quarters.

The following months are expected to be crucial for the real estate industry. The winter analysis had predicted a rise in the percentage of foreclosed homes in the slow market, leading to a decline in the prices. But now with the extension of the tax credit period and sanction of $8000 tax credit for first time home buyers and $6,500 tax credit for repeat buyers, there could be an increase in the demand for homes that would lower the percentage of foreclosed homes. This is likely to bring stability in the prices of homes all through the state. But the major question is how long this stability will last after the tax credit period expires? This is likely to create a demand that would be weaker than the normal demand.

The recent survey on negative equity had the following statements to make:
• As on September 30th 2009, negative equity indicated that present home prices are lower than the original credit.
• Foreclosed homes that were resold were mostly homes foreclosed by banks in the previous year.
When facing negative equity, you can approach realtors and mortgage professionals, who will help you to recover from negative equity.

For additional resources and information please visit the following sites.

Resource Links:
http://www.gmacrealestate.com
Bill Fields All Star Coaching Program: http://www.AllStarCoaching.net
GreatWest GMAC Search all MLS Listings: http://www.LocalHomeLink.com
GreatWest GMAC Consumer Buyer/Seller Blog: http://www.GreatWestBlog.com
T. Sami Siddiqui (Broker/ Owner) Buzz About Sacramento Blog: http://www.samisiddiquiblog.com
Brodie Stephens (Executive Vice President) One Stop Blog: http://www.brodiestephensblog.com
GreatWest Podcasts- Weekly Updates on new REO, Short Sale, Bank Owned Foreclosure Listings: http://www.HouseTalkOnline.com
GreatWest Videos: http://www.youtube.com/brodiestephens
Facebook Brodie Stephens Profile Page: http://www.facebook.com/brodiestephens
Facebook GreatWest Profile Page: http://www.facebook.com/searchmlshomesforsale
MySpace Brodie Stephens Blog: http://www.myspace.com/brodiestephens
MySpace GreatWest Blog: http://www.myspace.com/greatwest
Picasa Web Album: http://picasaweb.google.com/brodiestephens
GreatWest Real Estate Careers- GMAC is looking for Professional Realtors to Join Us: http://www.CareersWithUs.com
Global Employee Relocation: http://www.employeerelocation.blogspot.com
Apply for a Loan: http://www.choice1funding.com
ActiveRain Blog Brodie http://activerain.com/blogs/brodiestephens
ActiveRain Blog Companyhttp://activerain.com/blogs/greatwestgmac
Sacbeehttp://www.sacbee.com
Company WordPress Sitehttp://www.thehomeholders.com
Real Livinghttp://www.realliving.com

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Based on information from the Humboldt Association of REALTORS®, as of 06/02/2020. All data, including all measurements and calculations of area, is obtained from various sources and has not been, and will not be verified by broker or MLS for accuracy. All information should be independently reviewed and verified of accuracy. Properties may or may not be listed by the office/agent presenting the information. Copyright ©2020 Humboldt Association of Realtors®. All rights reserved.