A website that computes home values recently released reports that showed that one third of Americans owe more than what their homes are actually worth. These are the people who bought during the last five years. It also reported a 9.9 percent decrease in home values, the lowest median home price since the fourth quarter of 2004. Today’s median home price is at $206,919.
Zillow.com’s study showed that 29.1 percent of US homeowners have ‘underwater’ mortgage, meaning their debt exceeds the value of their houses. Other figures weren’t any better: 38.2 percent decrease in Stockton, California home values; 27.4 percent in Las Vegas; and about 20 percent in Phoenix, Miami and Los Angeles.
The alarming decline of home values spell disaster for homeowners and even the housing market in general. When home prices continue to go down, there is a very slim chance that homeowners who plan to sell their homes will even get profit. Last year, 75 percent of homes sold didn’t gain profit for the sellers. Negative equities and declining prices are the reasons why homeowners are having a difficulty in selling their properties.
Those who aren’t able to absorb the loss end up surrendering their homes to banks holding the mortgage. These then add to the other abandoned homes in communities hit by foreclosure. More unsold homes added in the market will have greater pressure on home prices.
It seems like the housing crisis has already affected everyone. If you’re one of those people who owe more than what your home is worth, it is recommended that you sell your property, even though it means you have to absorb the loss. Selling your home can actually have a positive effect in the housing market. It lessens the number of unsold homes in the market, which then affects home prices, and eventually the foreclosure rate.
Once more people do this, more unsold homes would be taken off the inventory and prices may start to stabilize. Spencer Rascoff, chief financial officer for Zillow.com, says that there are more sellers that are adjusting their hopes. They are now willing to absorb losses, and hopefully it’ll trigger more transactions in the future.
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