Home values are still falling nationally. More in some areas and less in others, but they still seem to be in retreat. People who bought property in the last five years or so are in real danger of being underwater. Or upside down. That's when the balance on the underlying mortgage is higher than the home's value. Those who put nothing or very little down are most vulnerable.
Zillow.com, a prominent real estate website, just released a report on the first quarter of 2009 according to which 21.9% of all homeowners nationwide are now taking a bath. It was 17.6% in the fourth quarter, so the increase is noticeable.
In the same report Las Vegas has claimed the top spot with 67.2% of homes now underwater. That is an alarming number. Mortgage borrowers who put quite a bit of money down could still be okay, at worst perhaps 5 to 10% upside down. That should make them eligible for the latest housing rescue plan, the Making Home Affordable one, where refinance can be done up to 105% of the home's value. As long as other important criteria is also met.
But those in Southern Nevada who are severely on the negative are facing a difficult situation. The only way they can refinance is to bring a check with many zeroes at the end to close the deal. In this struggling economy and job market that might be too much of a challenge. They can keep making payments and wait until the real estate environment here improves, potentially some day erasing the underwater problem. In truth, that could be a long wait.
Many are likely tempted to walk away from their homes. That would be a drastic step, but an option nevertheless. Everyone has to weigh their current unique circumstances and future plans and go from there. The more upside down a particular borrower is, the higher the odds that he'll skip on the house.
The severe price erosion in Las Vegas has admittedly had a large impact on foreclosures and once it's arrested, one of these days, a lasting, gradual recovery can begin.