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Number Of Underwater Homes Surges In 2019

by blogger1
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on Thursday, 16 May 2019
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Underwater mortgages and negative equity homes are back again. Just how bad is it? What does it mean for real estate investors?

The latest statistics from ATTOM Data show a resurgence in underwater homes in 2019. ATTOM’s latest report measures this metric by the number of properties that has serious negative equity, and owe at least 125% of their home’s value on mortgages.

Seriously Underwater

There were at least 5.2M homes in this situation as of Q2 2019. That’s about as many homes that sell in an entire year in a strong market.

This does not count all of those who just have zero equity or too little equity for a conventional sale using a Realtor. If you added in, all those that owe 90% to 124% of their property value on mortgages this number could be dramatically higher. It will get higher every day as prices float down again.

Then if you count other debt and liens that may mean owners have even less equity, that number may already be at crisis level. Think past due property taxes and code violation fines.

Some zip codes are already seeing negative equity properties return to 2012 levels, with upwards of 20% of properties in trouble. In at least 32 zip codes more than half of properties are seriously underwater.

Equity Rich Properties

The good news is that there is a large number of equity rich properties out there as well. These are those with a loan to value of 50% or less.

While this number is shrinking, and has been since 2017, nationally, 25% of homes were considered equity rich in Q1 2019. Most of them being in California.

What it Means for Real Estate Investors

While there do still seem to be speculative buyers willing to pay 150% of the real value out there, many more property owners are finding themselves stuck. They simply can’t sell conventionally. It’s going to take seller financing and creative financing to make it happen.

The great news is that all of these equity rich properties are really ripe for wholesaling. Those equity cushions will shrink if the market keeps contracting, but wholesalers who act fast still have plenty of potential properties to pick from.

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