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March 28th, 2017 7:50 AM

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A recently released report reveals that underwater properties are steadily declining, which is a possible turning point in the ongoing inventory crisis.

 The amount of seriously underwater properties decreased by over one million last year, while the amount of “equity rich” properties increased by 1.3 million.  Seriously underwater is defined as a property with a loan-to-value ratio 25% or more of its fair market value; equity rich is defined as a property with a LTV ratio 50% or less.  The opposing gap between the two is a signal of the overall health of the housing market.

Since home prices bottomed out nationwide in the first quarter of 2012, the number of seriously underwater homeowners has decreased dramatically while equity rich homeowners have steadily increased over the past several years.  But despite this upward trend, the massive loss of home equity during the housing crisis forced many homeowners to stay in their homes longer before selling, effectively disrupting the historical domino effect of move-up buyers that feeds both demand for new homes and supply of inventory for first-time homebuyers.

Even with this positive turn, approximately 10% of all properties with a mortgage are still seriously underwater, but it is at the lowest level since 2012.  If the economy stays on a steady course, in time, property values could increase enough to shed most of the negative equity in many of these homes.   The drop-off of shrinking underwater properties could indicate that the inventory shortage may not last much longer. 

Sellers, this would mean another “buyers market” where competition with other homes would bring fewer full price offers and more negotiation!  So, now is the time to sell!

Written by Barbara Doeringer



Posted in:Real Estate
Posted by Allen Doeringer on March 28th, 2017 7:50 AMPost a Comment

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