More than four in 10 South Florida homeowners who bought in the last five years owe more on their mortgages than their homes are worth. Now, strapped homeowners are saddled with houses that aren’t worth what they paid for them, and banks don’t want to lend to them.
Nationally, an estimated 12 million households, or 16 percent of all homeowners, owe more on their mortgages than their houses are worth, according to an analysis by Moody’s Economy.com that was reported in The Wall Street Journal.
For those who bought in 2006 — the year prices peaked — the situation is even worse. A startling 76 percent of those homeowners are ”under water,” meaning their mortgage debt exceeds their property’s market value.
The statistics, compiled from sales and mortgage data by Zillow.com, illustrate the fragility of South Florida’s real estate market. Plunging prices have started to lure buyers off the sidelines and sales have ticked upward.
But the market is still flooded by foreclosed homes that banks want to unload, and the volume of underwater mortgages suggest many more are coming. Homeowners in a pinch either can’t sell for enough to pay off the debt or they walk away, thinking it’s better to abandon the property than invest in a sinkhole.
Some homeowners find themselves wondering if they’d be better off if they did default. They are frustrated because they can’t take advantage of lender programs to cut interest rates and, sometimes, principal balances to keep people in their homes. To qualify, homeowners usually must be in default or in foreclosure.