Tag Archives: underwater

Let’s hope the “new normal” in housing doesn’t look like Merced County, CA

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A USA Today article about the “new normal” in US housing uses Merced County, California as its main example. The situation there is not good:

The median home price, $116,000, is down 68% from its peak in 2006. Three of five homeowners with a mortgage here owe more on their loans than their houses are worth, compared with about one in five nationally.

While the situation is particularly dire in Merced County, it is also not great in a number of other places:

Nationwide, home prices are down 30% from their 2006 peak. Moody’s Analytics economist Celia Chen says national home prices will regain that ground by 2021.

Some areas will take far longer. In 22 U.S. metropolitan regions, most in California and Florida, home prices won’t return to their 2006 peaks before 2030, Chen estimates. That includes such cities as Miami, Detroit, Phoenix, Las Vegas and Riverside, Calif.

And a USA Today chart shows the counties with the most mortgages underwater: Clark County, Nevada (where Las Vegas is located) is at the top with 71.1% of mortgages underwater. Overall, there are 17 counties over 50% and the top 30 on the chart are all over 46%.

This is a long-term issue for these places, particularly if housing values for the whole country aren’t expected to reach the 2006 peak until at least 2021.

Prolonged housing issues: one-third of Chicago homes underwater

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The housing crisis of recent years is not just about foreclosures. The loss in housing value across the board means that many homeowners with mortgages owe more on those mortgages than their house is worth. This is a common occurence in the Chicago region where new data suggests one-third of homes are underwater, a rate almost ten percent higher than the national average:

Some 32.9 percent of all local single-family detached homes with mortgages were underwater in September, meaning the homeowners owed more on the loans than the properties are worth, according to new data from realty Web site Zillow.com. That compares with 30.9 percent in June and 27.2 percent in September 2009. The report does not include data on condominiums.

Nationally, 23.2 percent of homes have negative equity.

“Negative equity is going to continue to cast a pall over the housing market for the next several years,” said Stan Humphries, Zillow’s chief economist. “All these people are trapped in their homes and can’t move onto another one and it’s throwing off more foreclosures. For people who are not going to move anytime soon, it is much more of an academic issue. For people who need to move or who encounter an economic issue, it’s a material issue.”

I haven’t seen too many people speculating about the social consequences of this. Americans in the last 60 years have been fairly mobile people but these sorts of mortgage situations limits that. This may have consequences for job markets; even if there are jobs available elsewhere, fewer people are then able to pick up relatively quickly and move. On the other hand, it may lead to increased “feelings or perceptions of neighborhood” as more residents have to stay put longer than they would have even just five years ago.