Report: 8.3M Homeowners Will Be Overwater, Able to Sell in 15 Months
NEW YORK (TheStreet) -- It's taken five years, but the number of so-called "underwater" homes, where the amount owed on the property exceeds the value of the home, is starting to trend in the right direction for homeowners.
Right now, the number of homes considered to be deeply underwater -- owners owe at least 25% more on their mortgages than the property is worth -- stands at 10.7 million.
But another 8.3 million homes are considered by real estate industry analysts to be close enough to value liquidity to be above water by Jan. 1, 2015. That's about 18% of all U.S. homes with a mortgage as of Sept. 1.
Those figures come from RealtyTrac, the Irvine, Calif. real estate analytics firm, via its U.S. Home Equity & Underwater Report.
The firm calls the downward trend in underwater homes great news for homeowners and for the real estate market. Why? Because as more homes increase in value and rise up from underwater status, more properties will likely wind up for sale, creating more opportunities for homebuyers.
It also means fewer short sales and foreclosures for distressed homeowners.
"Inventory of homes for sale is low across the country, but rapidly rising home prices in some markets over the past year has left many homeowners flush with equity and primed to sell," says Daren Blomquist, a vice president at RealtyTrac. "Rising home prices also means more distressed homeowners now have positive equity and may be able to avoid foreclosure without resorting to a short sale."
The firm says that the 10.7 million homes deeply underwater represent a significantly lower number than in May 2013, when there were 11.3 million such homes. And both figures are significantly lower than the 12.5 million deeply underwater homes recorded by RealtyTrac in September 2012. On average, distressed homeowners are climbing back to dry land at the rate of 150,000 U.S. per month.
The takeaway? Expect increased buying activity in the coming months -- and even more next year and in 2015.
"Steadily rising home prices are lifting all boats in this housing market and should spill over into more inventory of homes for sale in the coming months," Blomquist says. "Homeowners who already have ample equity are quickly building on that equity, while the 8.3 million homeowners on the fence with little or no equity are on track to regain enough equity to sell before 2015, if home prices continue to increase at the rate of 1.33% per month that they have since bottoming out in March 2012."