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Fewer Homeowners Have Underwater Mortgages

Wednesday, August 11, 2010

A real estate website reports the number of single-family homeowners in the country with underwater mortgages – where the amount owed on the mortgage exceeds the home's value – fell in the second quarter of this year, even as home values declined. California was among the few states that experienced increases in home values in more than a quarter of its markets.

Negative equity, which refers to the percentage of homeowners with underwater mortgages, dropped 21.5 percent from 23.3 percent in the first quarter, and from 23 percent last year, according to Zillow.com. The Zillow Home Value Index fell 3.2 percent year-over-year and 0.6 percent from the first quarter to $182,500.

California fared better than other markets, with residents helped by an improvement in home prices. In California, 27.8 percent of markets tracked by Zillow saw increases in home values in the past year. Home values in five California markets have increased for the past five quarters, and four of those have increased by more than 5 percent since the second quarter of 2009. The Zillow Home Value Index was up 7.3 percent year-over-year in the San Diego metropolitan statistical area (MSA); up 5.9 percent in the San Francisco MSA; up 5.6 percent in the San Jose MSA; and up 5.5 percent in the Los Angeles MSA.

Zillow reported 13.8 percent of all mortgage borrowers in San Jose owed more than their properties are worth; 16.9 percent in Los Angeles; 19.6 percent in San Francisco; and 20.4 percent in San Diego. Las Vegas continued to lead the nation with 73.9 percent of all mortgage borrowers underwater. Phoenix had 66 percent, while Orlando, 64.6 percent.

"Nationally, home values are moving in the right direction as rates of decline continue to slow. There is a large unknown on the horizon, however, as these second quarter numbers are still heavily influenced by the federal home buyer tax credits, which were available for homes under contract by the end of April," Zillow Chief Economist Dr. Stan Humphries explained. "As the national housing market limps toward stabilization, individual markets are a mixed bag."

Jeff Bell, president of the Silicon Valley Association of REALTORS®, said California benefited from both federal and state home buyer tax credits. "Both these tax credits helped stimulate demand and appreciation in many markets. Our hope is that these values will be sustainable. We are fortunate that the assets and amenities of living in Silicon Valley continue to bring a strong housing demand to the region."

The federal government tax credits expired April 30. Contracts originally had to close by June 30, but the deadline was extended by three months. The California Franchise Tax Board announced last week that it would accept applications for the California first-time home buyer tax credit through Aug. 15. 


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

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