St Louis Mortgage Analysts Say Homeowners Underwater Till 2016 | Mortgage

St Louis Mortgage Analysts Say Homeowners Underwater Till 2016

by FloydJ.Tapia

A long awaited announcement came estimating that the average homeowner who currently has negative equity will probably not experience any positive equity until 2015 to early 2016 according to First American CoreLogic.

And for those borrowers who are "underwater" as far as their equity is concern may have to wait until 2020 to see any positive change in their equity especially if they live in parts of the United States where the real estate market is severely depressed.

All in all, the total projection that is being laid on the financial table by CoreLogic said a realistic 11.3 million residential properties or a shocking 24 percent were in an underwater equity state at the end of the fourth quarter in 2009.

Experts are now saying that the largest decreases in overall home prices has already hit the consumer. But questions arise as to the time frame it will take for these borrowers to recoup their original home investment.

To answer this seemingly unanswerable question, CoreLogic has been trying to predict how long the waiting time may be for this negative equity to exist. They are currently using projected future home values and unpaid principal balances for a set of Core Based Statistical Areas (CBSAs) to see how long it will take for the average underwater borrower to return to positive equity.

As mentioned earlier, their predictions say it will take the average borrower another 4 to 5 years or perhaps until 2016 for this negative equity snafu to completely disappear.

But as earlier stated, in those severely depressed markets, like Detroit for example, negative equity may not dissipate until 2020, largely due to its depressed economy. Negative equity has been and continues to be widely considered a trigger to strategic default.

The United States Treasury Deparment feels that the solution to this monumental problem requires the voluntary efforts of getting lenders and servicers on board to offer consumers principal reductions on their home loans and make this available via FHA refinancing.

Whereas millions of hopeful consumers are awaiting the day that their homes start appreciating and it time that will happen, an economist shared a more direct solution stating that by paying down one's own loan balance it would no doubt bring about a quicker solution to this negative equity debacle.

Now as far as loan payments and price increases are concerned, St Louis mortgage brokers are saying that over the next 10 years, the average loan balance will decrease by an annual rate of 3.3 percent. But the average home price is expected to increase at a 3 percent annual rate over the same time period. Again, not much profit as regards home appreciation. We will have to wait and see.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

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