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From Housing Bubble to Negative Equity Bubble…
April 25th, 2013 1:24 PM

The negative equity bubble is only one of the results of the Housing bubble…bursting.  Negative equity is when someone owes more on their mortgage than the value of their property or could sell their property for, also known as underwater.  The “bubble” is the effect it has on the market.

Here is something interesting, many people who are underwater on their mortgages, don’t want to sell their homes, according to the Chicago Tribune.  They would actually prefer to wait until prices go up.  By keeping their homes off the market, they create a more competitive market.

Typically markets with very little backlog of foreclosures, making prices come up because buyers have less options.  Classic supply and demand principle, however, there is one problem.  This isn’t the case for most markets and especially not in judicial states.

CoreLogic says that 22% of all homeowners in the US are underwater on their mortgages.  The unfortunate statistics of homeowners that never recover their loan are, 70% of homeowners over 30 days delinquent, 95% of homeowners over 60 days delinquent, and 99.2% of homeowners over 90 days delinquent.

In Chicago alone, 36% of the market is underwater, 34% are underwater by less than 20%, but 15% is underwater by twice the value of their home.

Most of these homeowners come to the realization that if they want to avoid foreclosure, a short sale may be their way out.  Thankfully for them, we have a 1 year extension on that debt forgiveness.


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Posted by Michael Hobbs on April 25th, 2013 1:24 PMPost a Comment

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