House prices are still dropping. A recent report shows that as property values go down, more American homeowners are finding themselves with negative equity. This means they can’t sell their homes for enough to cover real estate agent fees and save up for a new home’s down payment without dipping into their personal savings.
Foreclosures are still a big problem, but falling home values and negative equity are creating even bigger issues in the housing market. Zillow’s data from the third quarter of 2011 reveals that about 28.6% of U.S. homeowners owe more on their mortgages than their homes are worth. This affects approximately 14.6 million borrowers.
In some parts of the U.S., the drop in property values is particularly severe. A study by 24/7 Wall St. highlights that former booming housing markets, like those in California, Florida, and the Southwest, are most troubled by underwater mortgages. A large number of properties listed for sale might be pushing home prices down. For instance, home prices in Las Vegas have dropped almost 60% from their pre-recession levels and are still falling.
For the housing market to recover, there needs to be more activity and movement. However, falling prices and negative equity are causing a standstill, worsening the housing problems. This lack of movement makes the housing market’s issues even more severe.