Homeowners underwater on their mortgages got 148 billion reasons to smile in the second quarter of 2013. Rising home prices put $148 billion in the home equity piggy banks of the 49.3 million U.S. homeowners still paying off their mortgages.
Rising home prices are rebuilding equity, and they’re also rapidly eating away at a figure the media loves to harp on because doom and gloom sells: The number of underwater homeowners.
“Underwater homeowners” is a popular but often incorrectly reported data point that shows up in screaming headlines, like ‘One Quarter of Homeowners Underwater.’
Not so. To be underwater means you owe more on your mortgage than your home is worth, and, therefore, you have to have a mortgage. About 25 million or one-third of homeowners don’t have a mortgage.
There’s a big difference between a percentage of 73 million homeowners and a percentage of 50 million who have a mortgage.
I love investing in real estate, so it drives me nuts to see the statistics on underwater homeowners reported without that little “of homeowners with a mortgage” detail.
What If You’re Still Underwater?
As of the second quarter, 14.5% of homeowners (7.1 million) with a mortgage were underwater, according to real estate data firm CoreLogic. Quite an improvement from year-end 2009 when a whopping 25.7% of homeowners with a mortgage were underwater.
Of course, 7.1 million is still too many. In Miami and Tampa, Fla., alone, more than one-third of your fellow homeowners with a mortgage are underwater.
If you owe more than your home is worth, your best bet is to look into lowering your monthly payments by refinancing through the federal HARP program while you wait for your home’s value to rise. When you see the number of homes for sale shrinking, that’s a sign home equity is likely to soon rise in your area.
So what’s the outlook? “Tight inventory in the months ahead will push up home prices,” says NAR Chief Economist Lawrence Yun.
Anyway, I just can’t help sending out a big “yippee!” to the 42 million of us with a mortgage whose homes are worth more than we owe our lenders and to the 25 million Americans who’ve worked hard to pay off their mortgage loans or who paid cash for their homes (lucky you!).
Way to hang in there!