This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Homeowners Rise Above Water on Mortgages

The negative equity numbers also don't say anything about whether or not the loans coming out from underwater are delinquent. While the overall delinquency rate dropped dramatically in the fourth quarter of 2012 to 7.09 percent of all loans, according to a survey released Thursday by the Mortgage Bankers Association, nearly 11% of all U.S. mortgages are either delinquent or in the foreclosure process.

"One cautionary note is that the 90 day delinquency rate increased by 8 basis points, reversing a fairly steady pattern of decline and the largest increase in this rate in three years," notes the MBA's chief economist Jay Brinkmann.

These so-called "seriously delinquent" loans are being processed more quickly now that new foreclosure rules are in place and will therefore be sold back to banks or investors in the next few months. Those sales would therefore be shown as loans coming out from underwater because they would cease to exist.

Another important factor in looking at negative equity, as with everything else in real estate, is location:

"Among the nation's 30 largest metro areas, those with the highest number of homeowners freed from negative equity last year were Phoenix (135,099 homeowners freed in 2012); Los Angeles (72,936 homeowners freed in 2012); Miami-Fort Lauderdale (70,484 homeowners freed in 2012); Dallas-Fort Worth (59,461 homeowners freed in 2012); and Riverside, Calif. (58,417 homeowners freed in 2012)," notes the Zillow report.

The highest volume of underwater borrowers were in the most distressed states, where the foreclosure rates are high and where investors are pursuing short sales fervently. It is therefore incorrect to make the assumption that all of the "newly freed" borrowers are either still in their homes with newfound equity or sold at any kind of profit. Of course this also means that negative equity may cure faster than anticipated, since it is so highly concentrated in certain hot investor markets.

The return of home equity is good news for the greater economy, as it makes borrowers feel better about their own personal wealth and therefore more apt to spend. It could also prompt more borrowers to sell their homes. Unfortunately that will not do much to ease the severe inventory shortage of homes for sale, as most sellers will be buyers as well. There are currently just 1.74 million homes for sale, the lowest since December of 1999.

--Written by Diana Olick at CNBC
CNBC is a world leader in business news, providing real-time financial market coverage and business information.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.64 0.00%
FB $118.57 0.00%
GOOG $698.21 0.00%
TSLA $241.80 0.00%
YHOO $36.53 0.00%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs