Nearly a third of Florida mortgages upside down

From the Palm Beach Post:

No need to put a fright mask on these numbers: Nearly one in three Florida mortgage borrowers owed more on their loans than their homes were worth in the third quarter, according to a report issued Friday.

Fully 1.2 million of Florida’s 4.2 million mortgages — 29.2 percent — were upside down, said First American CoreLogic of Santa Ana, Calif.

If home prices dip another 5 percent, nearly 200,000 more Florida borrowers would slip under water. Further price declines seem a near certainty as foreclosures soar and job losses mount.

Moody’s Economy.com forecasts a 10 percent price decline in Palm Beach County, while Veros Real Estate Solutions predicts a 15 percent drop for Palm Beach County and the Treasure Coast in the coming year.

It all adds up to a gruesome picture. With so many homeowners under water and the job market weakening, foreclosures are likely to rise, said Sam Khater, senior economist at First American CoreLogic.

“There’s a large percentage of very vulnerable homeowners,” Khater said. “If they lose their job, if they run into some kind of health problem, or divorce, they might just walk away.”

Most homeowners will hunker down and continue to make mortgage payments in spite of the downturn, Khater said. But negative equity adds a toxic new ingredient to the housing market witches’ brew.

First American CoreLogic said more than 7.5 million properties nationwide have negative equity and an additional 2.1 million would likely follow should home prices decline another 5 percent.

New York had the lowest share of homes with negative equity at 7 percent, followed by Hawaii at 8 percent, Pennsylvania at 9 percent and Montana at 10 percent, according to the report.

Comments

[Fuzzy Bear]

"Nearly one in three Florida mortgage borrowers owed more on their loans than their homes were worth"

I would bet that many of these people are a bit angry having been duped by the marketing hype of the special interest groups. Hype such as:

Buy now or be forever priced out of the market.

Property values in Florida will always keep going up.

Now is not a good time to buy, it's a great time to buy.

[JD]

Duped? Say what?!!?!?

Did the special interest groups sign the loan papers? Did George Bush agree to the terms on your mortgage?

No, the only people who got duped in all this are the people who continue to pay their mortage, taxes and insurance while those around them use houses like ATMs and walk away from their houses.

No one EVER makes anyone sign for a mortgage. Ever. It's a completely voluntary tran sacion, so PLEASE don't blame Realtors, loan people, builders, etc. You signed it, it's YOUR loan.

America used to be a country that acknowledged the concept of personal responsibility. Now, everything is someone else's fault.

[Chris]

I 100% agree with you JD. I'm not saying that banks were acting with the customers best interest in mind, BUT the customer signs on the dotted line. This mess has gotten out of control. I help customers with loss mitigation and loan modification. The banks, especially in Florida, are very eager to restructure loans to be mutually beneficial for both them and the borrower. The last thing these banks want is more Florida property. We're hoping this will slow the depreciation and foreclosure rates.

[Fuzzy Bear]

No one EVER makes anyone sign for a mortgage.

That is like saying nobody in the mortgage business ever falsified a loan application or nobody in the special interest groups put out false information to dupe the consumer.

There are lots of cases in the courts and on the criminal dockets to back my statements. However, the blame clearly goes to those who participated in the housing bubble from the end user to Wall Street.

[Real]

Fuzzy. I have to disagree with you. How do you define those that participated in the housing bubble? Are you not willing to acknowledge that people relocate and therefore buy houses? Not everyone is a market timer or speculator. I moved here for a job opportunity and bought something that was within my budget. Yet today I am also upside down. Our economy relies on talent being willing and able to relocate for better opportunities. So why is this my fault?

I also question whether one third of all Florida homeowners bought during the "bubble".

I think that is like blaming everyone that bought stocks since 911 on the current stock market downturn.

[luis]

Both parties are to blame. The general public who are very uneducated about finances (rather watch dancing with the stars then get educated)and the big corporations (banks,developers, real estate,etc.) lobbying (bribing) legislatures to pass laws that take advantage of the public. Throw in a government easily corptued by money and you have a perfect storm of bad times to come. Lots of pain to come and no easy solutions in sight.

[Fuzzy Bear]

Real said, I moved here for a job opportunity and bought something that was within my budget.

Real, I understand your situation and based on what you mentioned, you sound like a financially responsible person.

However, I have two friends who moved to the Tampa Bay area with their families and ended up renting partly due to asset prices falling. That was two years ago and one of them just recently bought a home, but factored in future declines to mitigate his potential lose of value.

Real said, So why is this my fault?

It is not your fault based on what you mentioned. You are more of a victim of circumstances or incorrect information being put out by special interest groups.

There were three bubbles that were forming the past several years, the housing bubble, the asset bubble and the credit bubble. In the Tampa Bay market, housing prices went way beyond the local incomes. This was caused by pure speculation by those who were more concerned about putting money in their pockets at your expense.

Luis sums it up correctly.

[Real]

Fuzzy, thanks for the response but I think I paid a fair price for my home and I happy with my decision. So leave the "victim" designator up to me to decide. Your decision to rent is your own and is no more correct or incorrect than my decision to buy. The fact remains that a home (personal residence) is a liability to the owner under any circumstance.

Friend one may be the wiser since he will be able to claim homestead and will thereby pay lower annual taxes on his home - all other things being equal of course.

Last point and I will keep saying it until you, Tino, and James finally get it - the broken tax and insurance systems in Florida make affordability a problem. Home prices are not the issue in general terms.

[Tino]

Um, I've never disputed the fact that tax and insurance impacts affordability. In fact, quite the opposite.

I will refer you to http://blogs.tampabay.com/realestate/2008/09/home-price-inde.html for my views on the topic.

[Fuzzy Bear]

Real says: Your decision to rent is your own and is no more correct or incorrect than my decision to buy.

You have that point incorrect as I don't rent.

However, I would disagree with you simply on the basis that the renter is not holding an asset that is declining value. Bottom line, the renter is not in debt and owes more than the property is worth and can walk away without harm done to their credit rating when the lease expires. Whereas the owner cannot simply walk away without taking a financial loss or having serious harm done to their credit rating if they walk away.

I agree with you on the insurance and tax issues as they are way to high for the incomes in the Tampa Bay area. However, the main issue of the housing bubble was not taxes or insurance, it was home prices that outpaced incomes in the Tampa Bay area.

The taxes and insurance cost increased to keep pace with property values that were going through the roof. I might also note that insurance costs were rising at a rate that surpassed the pace of wage increases partly due to claims from the past hurricanes.

Other contributing factors include poor investments and losses incurred by the insurance companies and insurance models that insurance companies used to increase insurance rates even though the models were incorrect.