Phoenix Homeowners Sinking as Mortgage Rates Fall

While U.S. mortgage rates trend toward record lows, even more Phoenix AZ homeowners are finding themselves underwater. Those in trouble with their finances can contact our Phoenix bankruptcy lawyers to have their questions answered for free.

According to Zillow – the online “home and real estate marketplace” that analyzed and reported last month on 30-plus home-markets across the U.S. – the metro-Phoenix area had a 55.5% negative equity (underwater) mortgage rate for the first quarter of 2012. Approximately 27% of those underwater in their Phoenix-area homes owed twice what their property was worth! For all of Arizona, the 2012 first quarter rate of negative equity was 52.3%.

Among major metropolitan areas across the country, Phoenix came in second and was topped only by Las Vegas NV at 71%. Right behind Phoenix was Atlanta GA at 55.2%, followed by Orlando FL at 53.9%, Riverside CA at 53.4%, Sacramento CA at 51.2%, and Detroit MI at 49.8%.

Zillow.com arrived at its percentages by examining existing market values for owner-occupied homes and comparing those figures to the amounts owed on those mortgages. The source data on loan balance amounts was collected from TransUnion. With over half of all metro-Phoenix homes being underwater to some degree, the total negative equity for our area was approximately $39 billion for the first quarter. Total negative equity nationwide was about $1.2 trillion and includes about one-third of all mortgaged homes. A figure representing minimal improvement from the rate of negative equity for the same quarter in 2011.

Consequences of Persistent Negative Equity

As Zillow’s chief economist Stan Humphries noted when the underwater mortgage rates were released, negative equity not only “remains an issue for the housing market as a whole,” it jeopardizes our nation’s economic recovery.

Homeowners who find themselves underwater on their mortgages – homes worth substantially less than what is owed on the loan – are often stuck where they are. Selling the property will involve taking a loss, because the home will list for less than what the homeowner owes. Real estate loans are due and payable in full upon any conveyance to a buyer. So unless ready cash is available to pay off the difference between what is owed and what the house actually sells for (which is very unlikely), homeowner options are limited to loan modifications and short sales.

Just as significant is the risk that stagnant economic growth will increase unemployment, making it impossible for homeowners to pay their mortgages. When people cannot sell their homes to move to more affordable housing or to relocate to areas where there are greater job opportunities, then more foreclosures and bankruptcies are inevitable as defaults increase.

FNC Residential Price Index Reports Phoenix Home Prices Rising

But there was also good news for Phoenix in the March FNC Residential Price Index (the FNC tracks 22 home-markets). The FNC index reported a 1.4% home sale price increase. March typically shows strong home sales for the Phoenix area, particularly when compared to the national month-over-month average gain which was about .5% for the same period.