Number of Portland-area ‘underwater’ mortgages cut in half, Zillow says

Foreclosure-mediation.jpg
The number of Portland-area homeowners left “under water” on their mortgage at the bottom of the housing crash has since been cut in half. (The Associated Press)

Elliot Njus | enjus@oregonian.comBy Elliot Njus | enjus@oregonian.com 
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on November 21, 2013 at 6:00 AM

 
   
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Rising home prices have by one measure freed more than half of the 144,000 Portland-area homeowners trapped under their mortgage debt in the housing collapse.

The real estate website Zillow said Thursday that nearly 73,000 homeowners who were “under water” on their mortgage — that is, they owed more than their home’s value — have been lifted back into positive equity by the end of September. About 71,000 homes, or 16.9 percent of mortgaged homes in the metro, remain underwater by about $5.25 billion.

Millions of U.S. homeowners found themselves in so-called “negative equity” after the housing bubble burst and prices began to crash. People who had recently bought their home, especially with a small down payment, or had taken out second mortgages found their home’s value had fallen below the amount of their home loans.

The negative equity picture has been improving since in Portland since the beginning of 2012, but it’s remained a stumbling block for the recovering housing market.

Homeowners who can’t pay off their mortgage by selling their house are forced to stay put, putting the brakes on transactions and limiting the selection for homebuyers. And because they can’t sell under normal circumstances, those homeowners at greater risk of foreclosure or a credit-damaging short sale.

Clearing the equity hurdle, however, is only half the battle. Homeowners who want to sell typically need a cushion to cover transaction costs and a down payment for their next home, so even those homeowners who are freed from negative equity will likely have to wait at the sidelines as they continue to pay down their loan.  

Home-price gains are expected to slow over the next year, and the recovery rate of underwater homeowners will slow similarly. By the same time next year, Zillow forecasts the underwater mortgage rate will be 13.8 percent.

Negative equity has proven difficult to measure because estimates of a given home’s value and debt load can vary.

The real estate data firm CoreLogic has typically produced rosier underwater mortgage numbers for the Portland area, saying most recently that 38,000 metro homes were underwater, representing 8.1 percent of mortgaged homes. Both measures show significant improvement, especially through 2013.

 

Metro underwater mortgages
County ‘Underwater’ mortgage share
Columbia 27.0 percent
Yamhill 25.1 percent
Clark 21.0 percent
Skamania 19.1 percent
Clackamas 16.5 percent
Washington 15.9 percent
Multnomah 13.5 percent
Portland metro 16.9 percent
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