Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.
Second-quarter home prices fell 9.9 percent from a year earlier, giving 29 percent of owners negative equity, said Zillow, the Seattle-based service that offers values for more than 80 million homes. For those who bought at the 2006 peak of the housing market, 45 percent are now underwater, Zillow said.
Negative equity and declining prices are making it difficult for homeowners to sell property for a profit. Almost one-quarter of U.S. homes sold in the past year were for a loss, Zillow said. That contributes to the foreclosure rate because some homeowners can't absorb the loss and end up surrendering their homes to the bank that holds the mortgage, said Stan Humphries, Zillow's vice president of data and analytics.
Of course some of the hardest hit areas were in California.
The highest percentages of homeowners with negative equity were located in California. In four of the state's metropolitan areas -- Stockton, Modesto, Merced and Vallejo-Fairfield -- the number of homeowners whose mortgage debts exceeded the values of their properties topped 90 percent, Zillow said.
In five more California areas -- the Inland Empire (Riverside-San Bernardino), Bakersfield, Yuba City, El Centro and Madera -- the percentages were more than 80 percent.
Ninety percent of the homeowners that bought in these California communities within the last 5 years are underwater! Now that hurts. We know that with falling prices that some properties are worth less than half of the peak prices. The financial situation of many of these homeowners will take years to get back in the black. The brutal economics of the bubble implosion will take years rectify. With some areas never returning to the glorious bubble days.