The end of summer has brought some relatively good news to the housing market. Data shows that home prices are starting to increase, improving conditions for underwater borrowers who owe more on their homes than these properties are worth. CoreLogic estimates that many underwater borrowers have homes that are worth only about 5% less than the debt owed, a big improvement from previous spreads in months past. The rise in home prices also translates to declines in negative homeowner equity, which is important since equity is the most valuable part a homeowner’s wealth.
The data is hopeful, but many analysts suggest it’s just a temporary relief. Historically low interest rates and a shortage of homes on the market are helping to improve conditions, however, these are suggested to be superficial levers – The economy continues to struggle at its core, with sluggish hiring rates and stunted income growth.
In Southern California, the number of foreclosed homes continued to fall in August, which contributed to the increase in the area’s median home price. Additionally, the rate at which foreclosures were flowing on to the market slowed, and statewide notices of default, the first step in the foreclosure process, fell as well. Negative equity varies greatly across California with about 2 million homes underwater, about 29% of all statewide borrowers.
If you are one of these borrowers, or know someone saddled with debt that is greater than the value of the home, don’t let foreclosure sneak up on you. McFarlin LLP has experience counseling struggling homeowners and successfully fighting foreclosure. Contact us today and see how we can help.