28% of Homeowners Underwater
The lax credit policies during the Bush Administration have come close to sinking the American Dream. 10.7 million Americans live in homes whose mortgage now exceeds the value of the real estate. Another 2.3% or 2.3 million homeowners are within 5% of going underwater, or having an upside down mortgage. That constitutes 28% of all American homeowners.
The five states with the most underwater mortgages are no surprise. The ratio of upside down mortgages in these five states is staggering.
* Nevada 65%
* Arizona 48%
* Florida 45%
* Michigan 37%
* California 35%
In all these states, many of the prime loans have gone bad. The option-adjustable rate mortgages, where minimum down payments were used to purchase high-end homes, is as high as the lower priced mortgage failures. In states where home values have begun to stabilize, the number of upside down mortgages is dramatically lower.
If home equity credit lines are factored into the equation, it is estimated that 33.8% of mortgages would have been underwater in the third quarter compared to 32.2% in the second quarter.
Careful real estate investors read these trends and see opportunity. Supply definitely outweighs demand. Many investors have become familiar with foreclosure sales and short sales.
In fact the National Association of Realtors has begun to instruct agents in the procedures to transact short sales. Thus far, in 2009, short sales account for approximately one-third of all the NAR’s pending sales. Unfortunately, many of these transactions fail to close, a fact the NAR guards closely.
By learning all the necessary steps, investors are able to capitalize on bulk transactions at a fraction of the value. Banks do not like to take over real estate. They often will take a loss rather than bear the expense of carrying costs, but investors must present a viable, convincing argument. Sharpen up your short sales presentations and negotiate your way to profits.
