January 18th, 2013, by Jeff Collins
Rising home prices have pushed more than 15,000 Orange County homeowners above water during the first nine months of 2012, housing data firm CoreLogic reported.
Last summer 96,706 Orange County homeowners were under water — that is, they owed more on mortgages than their properties are worth. That’s 17.5 percent of all homeowners with a mortgage, CoreLogic said.
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That’s down 15,574 from the number of underwater homes at the end of 2011.
An additional 21,501 homeowners may still be “locked out” of the market because their homes are worth no more than 5 percent above what they owe on their mortgages.
All 112,280 under water or nearly under water homeowners likely would face a loss if they sell their home because closing costs and real estate commissions would eat up any potential profits.
Still, rising home prices will free up more homeowners in the year ahead, said Esmael Adibi, director of Chapman University’s Anderson Center for Economic Research. Chapman forecast that Orange County home prices will rise 6.8 percent in 2013.
“Clearly, that’s going to help people who are underwater, and they’ll be able to sell,” Adibi said. “As long as home prices are shoring up and showing improvement, that’s going to bring people more in line with their mortgages or (allow them) to sell.”
One fifth of owner-occupied Orange County homes still have so little equity in their homes that options for selling their homes without a loss are limited.
Adibi said underwater homeowners have four options: Continue paying the current mortgage; negotiate a loan modification that decreases their mortgage debt and monthly payments; sell at a loss; or go through a foreclosure or “short sale” for less than the amount owed on the loan.
Lenders have built up their bad-loan reserves in recent years and are more likely to negotiate loan modifications, further reducing the number of underwater borrowers, Adibi said.
Nationwide, CoreLogic reported that 10.7 million U.S. homeowners were under water last summer, representing 22 percent of all residences with a mortgage. Since the start of the year, 1.4 million borrowers nationwide have been pushed above water, the data firm reported.
“The number of underwater borrowers declined significantly,” said CoreLogic Chief Economist Mark Fleming. “The substantive gain in house prices made in 2012, partly due to tight inventory caused by negative equity’s lock-out effect, has paradoxically alleviated some of the pain.”