Throughout the nine-county region, about 18 percent of all homes with a mortgage – or 205,819 homes – were underwater as of June 30, according to real estate service Zillow.com. That’s a big comeback from just 15 months earlier, when negative equity peaked both locally and nationally.

In late March 2012, almost a third of Bay Area homeowners with mortgages – 31.2 percent, or 355,879 homes – had loans larger than their house’s value.

About one-third of homes are owned outright with no mortgage; they are excluded from the percentage rates.

“The Bay Area is getting out of negative equity at a much faster pace than anywhere else in the country,” said Stan Humphries, chief economist for Zillow. “It was a huge percentage point decrease there. Nationally the decrease is much smaller.”

Nationwide, the negative equity rate is 23.8 percent of mortgaged homes, Zillow said.

Home prices surge

Most of the gains are because of a surge in home prices as local real estate markets have grown heated. A smaller share stems from underwater homes changing hands, either as foreclosures or short sales, thus wiping out their negative equity.

The report comes as Richmond – among the areas most underwater – considers taking the radical step of invoking eminent domain to forcibly seize underwater mortgages and slash their principal to restore some equity to the homeowners. Richmond says the goal is to prevent foreclosures and stabilize neighborhoods.

Being underwater has huge implications for a homeowner, particularly when combined with a financial shock – death, divorce, job loss or mortgage payments resetting higher, for instance.

People who have equity in their homes, the largest asset for most Americans, generally have more consumer confidence.

“Homeowners feeling like they are richer in home values does translates to them feeling a bit ‘spendier’ on the consumer side of their expenditures, which will strengthen broader economic recovery,” Humphries said.

Not surprisingly, negative equity is most prevalent in areas that were ravished by foreclosures. The Solano County communities of Vallejo, Fairfield and Suisan City have underwater rates above 47 percent of mortgaged homes.

The Contra Costa towns of Pittsburg, Richmond, Antioch, Hercules and Oakley have rates well above 40 percent. Some Oakland ZIP codes also have high rates.

Even more relevant, in those areas it’s not just that many homes are underwater, it’s that they are deeply underwater, with significant percentages owing more than twice their home’s value. That means homeowners in those areas are unlikely to reach positive equity for many years.

By contrast, in the affluent areas of San Francisco, San Mateo and Marin counties, not only are far fewer homeowners underwater, most are underwater by smaller percentages. That means they have hope that the rising market will lift them into positive equity within a short time frame.

Underwater homes are among the reasons the real estate market has faced a limited supply of inventory.

“You’re still not seeing folks who bought in 2006 selling now because they’re not above water yet,” said Kevin Kieffer of Keller Williams Realty in Danville.

Fewer short sales

As equity continues to rise, more homes should hit the market.

“Our expectation is that a lot of people recently freed from negative equity will start to sell their homes, which will ease inventory constraints,” Humphries said.

The decrease in underwater homes is also borne out in far fewer short sales – homes sold for less than is owed on the mortgage.

“Short sales have dwindled down to hardly anything now,” Kieffer said. “There are only four active (short sale listings) in central (Alameda) county.

“The banks are not pushing hard for short sales the way they once were. I think they’re waiting to ride out this market for the upside. They don’t want to have to go through the expense of a short sale.”

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com Twitter: @csaid

Article source: http://www.sfgate.com/realestate/article/Bay-Area-leads-in-underwater-mortgage-rebounds-4772598.php

Throughout the nine-county region, about 18 percent of all homes with a mortgage – or 205,819 homes – were underwater as of June 30, according to real estate service Zillow.com. That’s a big comeback from just 15 months earlier, when negative equity peaked both locally and nationally.

In late March 2012, almost a third of Bay Area homeowners with mortgages – 31.2 percent, or 355,879 homes – had loans larger than their house’s value.

About one-third of homes are owned outright with no mortgage; they are excluded from the percentage rates.

“The Bay Area is getting out of negative equity at a much faster pace than anywhere else in the country,” said Stan Humphries, chief economist for Zillow. “It was a huge percentage point decrease there. Nationally the decrease is much smaller.”

Nationwide, the negative equity rate is 23.8 percent of mortgaged homes, Zillow said.

Home prices surge

Most of the gains are because of a surge in home prices as local real estate markets have grown heated. A smaller share stems from underwater homes changing hands, either as foreclosures or short sales, thus wiping out their negative equity.

The report comes as Richmond – among the areas most underwater – considers taking the radical step of invoking eminent domain to forcibly seize underwater mortgages and slash their principal to restore some equity to the homeowners. Richmond says the goal is to prevent foreclosures and stabilize neighborhoods.

Being underwater has huge implications for a homeowner, particularly when combined with a financial shock – death, divorce, job loss or mortgage payments resetting higher, for instance.

People who have equity in their homes, the largest asset for most Americans, generally have more consumer confidence.

“Homeowners feeling like they are richer in home values does translates to them feeling a bit ‘spendier’ on the consumer side of their expenditures, which will strengthen broader economic recovery,” Humphries said.

Not surprisingly, negative equity is most prevalent in areas that were ravished by foreclosures. The Solano County communities of Vallejo, Fairfield and Suisan City have underwater rates above 47 percent of mortgaged homes.

The Contra Costa towns of Pittsburg, Richmond, Antioch, Hercules and Oakley have rates well above 40 percent. Some Oakland ZIP codes also have high rates.

Even more relevant, in those areas it’s not just that many homes are underwater, it’s that they are deeply underwater, with significant percentages owing more than twice their home’s value. That means homeowners in those areas are unlikely to reach positive equity for many years.

By contrast, in the affluent areas of San Francisco, San Mateo and Marin counties, not only are far fewer homeowners underwater, most are underwater by smaller percentages. That means they have hope that the rising market will lift them into positive equity within a short time frame.

Underwater homes are among the reasons the real estate market has faced a limited supply of inventory.

“You’re still not seeing folks who bought in 2006 selling now because they’re not above water yet,” said Kevin Kieffer of Keller Williams Realty in Danville.

Fewer short sales

As equity continues to rise, more homes should hit the market.

“Our expectation is that a lot of people recently freed from negative equity will start to sell their homes, which will ease inventory constraints,” Humphries said.

The decrease in underwater homes is also borne out in far fewer short sales – homes sold for less than is owed on the mortgage.

“Short sales have dwindled down to hardly anything now,” Kieffer said. “There are only four active (short sale listings) in central (Alameda) county.

“The banks are not pushing hard for short sales the way they once were. I think they’re waiting to ride out this market for the upside. They don’t want to have to go through the expense of a short sale.”

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com Twitter: @csaid

Article source: http://www.sfgate.com/realestate/article/Bay-Area-leads-in-underwater-mortgage-rebounds-4772598.php

The negative home equity rate fell in the second quarter of this year, the fifth straight quarterly drop, but it is still alarmingly high and continues to hamper the housing recovery.

Currently, 23.8 percent of homeowners with a mortgage, or approximately 12.2 million, owe more than their homes are worth, down from 15.3 million one year ago, according to the report. Some, however, are still so far underwater that even with fast-rising prices, it will take years for them to see any home equity.

(Read more: Home sales suffer on higher rates: Realtors)

“Widespread rising home values during the past year have helped chip away at negative equity nationwide, helping many homeowners who were only modestly underwater to come up for air. For those homeowners who are deeply underwater, though, there is still a long row to hoe,” said Zillow Chief Economist Dr. Stan Humphries in a release.

(Read more: He’s not buying a house—why is Obama on Zillow?)

Article source: http://www.cnbc.com/id/100995592

(Read More: Despite Rising Demand, Some Builders Slow Production)

Listings were down 17 percent in March from a year earlier, according to the association, with several factors affecting inventories. Millions of Americans still owe more on their mortgages than their homes are worth, and that makes it impossible for them to move without incurring major expense.

Others are watching home prices rise and may be waiting to see just how high they go before listing their homes.

Meanwhile, home builders, while trying to ramp up production, are faced with a lack of land, labor and materials. Single-family starts were at a seasonally adjusted annual rate of just 619,000 units, an improvement from the worst of the crash but far below historical norms.

(Read More: Map: Tracking the US Real Estate Recovery)

Regionally, the pending home sales index was unchanged in the Northeast from February, up 0.3 percent in the Midwest, up 2.7 percent in the South and up 1.5 percent in the West.

Existing home sales in March, based on closings, fell just under one percent in March. While higher than a year ago, home sales appear to have leveled off, despite this being the normally busy spring season.

(Read More: Government Mortgage Fix Is Failing)

Article source: http://www.cnbc.com/id/100683911

SAN FRANCISCO (KCBS) — Real estate firms are reporting a record number of Bay Area homes are being bought with cash, making it increasingly difficult for first-time homebuyers to get their offers accepted.

Often, the bids are only accepted after multiple offers resulting from bidding wars, according to real estate experts.

Real estate agent Peyton Schteevah with Pacific Union in San Francisco said 26 percent of their transactions last year were all-cash deals. That is a reflection of the record statewide high in 2012, where 32.4 percent of overall home sales were cash purchases.

“People came to the table with cash deals because it was so competitive to get homes that they tried to get any advantage they could to get their foot in and have a very compelling offer,” he said.

Schteevah said plenty of people decided to cash in their stocks or use money they had saved in the bank to compete with investors, a situation that is squeezing out buyers obtaining mortgages.

“It is very, very frustrating,” he said.

Adding to the current environment is a low inventory of homes and a median Bay Area price of $426,500 in February, up 22 percent from the same time last year.

“It is a seasonal market. Right now it’s extremely hot, but if we learned anything from the past; it’s up and down,” he said.

(Copyright 2013 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

Article source: http://sanfrancisco.cbslocal.com/2013/04/03/rise-in-all-cash-home-sales-frustrates-bay-area-first-time-buyers/

Today, far more Americans are renting. In fact, all of the latest household formations, according to the U.S. Census, are in rental units. The home ownership rate, which reached a high of just over 69 percent in 2004, stood at 67.8 percent in the fall of 2007. Today it continues to fall, now down to 65.4 percent.

(Read More: Best US Housing Markets for Buyers and Sellers)

Perhaps the biggest difference in today’s housing market from 2007 is in mortgage rates and activity. In October of 2007, the average rate on the 30-year fixed mortgage was 6.38 percent. Today it is nearly half that at 3.67 percent. In turn, it is a tale of opposites. Refinance volume today is twice what it was in 2007, while mortgage applications to purchase a home are about half what they were.

(Read More: Soaring HousingStocks in Perspective)

In October 2007, the housing market was in the direct path of a massive foreclosure storm. Today, it is still picking up the pieces, with 5.3 million homeowners either delinquent on their mortgages or in foreclosure, according to Lender Processing Services. The good news is that the numbers are coming down, but the clean-up is far from over.

(Read More: How We Got Here, Where We’re Going)

Article source: http://www.cnbc.com/id/100419903

“One cautionary note is that the 90 day delinquency rate increased by 8 basis points, reversing a fairly steady pattern of decline and the largest increase in this rate in three years,” notes the MBA’s chief economist Jay Brinkmann.

(Read More: Why Sequestration Will Hit Housing on Several Fronts)

These so-called “seriously delinquent” loans are being processed more quickly now that new foreclosure rules are in place and will therefore be sold back to banks or investors in the next few months. Those sales would therefore be shown as loans coming out from underwater because they would cease to exist.

Another important factor in looking at negative equity, as with everything else in real estate, is location:

“Among the nation’s 30 largest metro areas, those with the highest number of homeowners freed from negative equity last year were Phoenix (135,099 homeowners freed in 2012); Los Angeles (72,936 homeowners freed in 2012); Miami-Fort Lauderdale (70,484 homeowners freed in 2012); Dallas-Fort Worth (59,461 homeowners freed in 2012); and Riverside, Calif. (58,417 homeowners freed in 2012),” notes the Zillow report.

(Read More: Taking The Real Estate Recovery Local)

The highest volume of underwater borrowers were in the most distressed states, where the foreclosure rates are high and where investors are pursuing short sales fervently. It is therefore incorrect to make the assumption that all of the “newly freed” borrowers are either still in their homes with newfound equity or sold at any kind of profit. Of course this also means that negative equity may cure faster than anticipated, since it is so highly concentrated in certain hot investor markets.

The return of home equity is good news for the greater economy, as it makes borrowers feel better about their own personal wealth and therefore more apt to spend. It could also prompt more borrowers to sell their homes. Unfortunately that will not do much to ease the severe inventory shortage of homes for sale, as most sellers will be buyers as well. There are currently just 1.74 million homes for sale, the lowest since December of 1999.

(Read More: Fewer Borrowers Are Behind on Mortgages, but for How Long?)

Article source: http://www.cnbc.com/id/100480500

Does this mean a return to the reckless equity withdrawals of the housing bubble? Likely not.

“I would guess that most of the current home equity line borrowing is quite prudent. We know that it is being very conservatively underwritten with plenty of equity,” said Guy Cecala, editor of Inside Mortgage Finance.

(Read More: Housing Already Shows Signs of a New Bubble.)

While it is too early to say exactly what borrowers are spending this new cash on, anecdotal evidence shows borrowers are largely sinking the money back into their homes.

“We are seeing more responsible uses today, like home improvements, education expenses or other major expenses that would be a more responsible use of a customer’s home equity,” Blackwell said.

The average home equity line in October of 2012 was just below $90,000 compared to October 2006, when lines averaged just over $100,000, according to Equifax.

Article source: http://www.cnbc.com/id/100446233

“Markets with increasing foreclosure activity in 2012 took the first step in finally purging delayed distress left over from the bursting housing bubble,” said Daren Blomquist, vice president at RealtyTrac. “Meanwhile, the underlying fundamentals in many of those markets are slowly improving, making it an opportune time to absorb additional foreclosure inventory this year — and that is particularly good news for buyers and investors hungry for more inventory to purchase in those markets.”

(Read More: Link Between Credit and Mortgages: Not What You Think)

RealtyTrac ranked the top markets for investors to set their sights in 2013, based on months’ supply of foreclosure inventory, percentage of foreclosure sales, the foreclosure discount and the percentage increase in foreclosure activity in 2012. Five of the top ten are in Florida, including Palm Bay, Tampa, Jacksonville and Orlando. Florida requires a judge in the foreclosure process and therefore has an extremely large backlog.

(Read More: Feds’ ‘Fixer-Upper’ Loan Helps Tidy Up Foreclosures)

New York, another judicial state, fills 4 of the top ten spots, with Rochester, Albany and the New York City area leading. Chicago rounds out the roster.

The worst markets to look for foreclosures are largely out West, where the foreclosure crisis hit first and where investors have already bought so many properties that they are now fighting for what is left. Low supplies have led to bidding wars in cities like Phoenix, Las Vegas, San Jose, CA and even Portland, OR.

(Read More: Best US Housing Markets for Buyers and Sellers)

It is truly a tale of east versus west, just as it was at the start of the foreclosure crisis with the west faring far worse than the rest of the nation. Now it is just the opposite, as demand for distressed properties continues to increase and supply determines the best bargain destinations.

(Read More: Facing Foreclosure? Don’t Just Sit There—Act Now)

Article source: http://www.cnbc.com/id/100423428

(Read More: Could Rentals Be the New Red Flags in Real Estate?)

Housing inventory usually drops in the winter months, only to rebound in the spring, but this winter has seen a larger than normal decline. Realtors are looking for more homes to come on the market in the spring, but there are still 10.7 million borrowers who owe more on their mortgages than their homes are worth, and an additional 2.3 million who have less than five percent equity in their homes, according to CoreLogic. Those homeowners cannot sell without having to pay into their mortgages, so they are largely stuck in place. First-time home buyers are purchasing at an unusually low rate due to tighter credit standards, and many potential sellers simply don’t want to list until prices rise more substantially.

(Read More: Soaring Housing Stocks in Perspective)

“We expect a seasonal rise of inventory in the spring to help, but a seller’s market may be developing,” notes Yun. “Much of the West is already a seller’s market for homes priced under a million dollars, but conditions are much more balanced in the Northeast.”

(Read More: Home Builders Turn to Rental Apartments)

Article source: http://www.cnbc.com/id/100412357