More California Bank Foreclosed House Expected Due to Negative Equity

by Simon Lindsay on Foreclosure Crisis

More and more homeowners in East Bay area in California are seeing their home equities drop daily as the economy keeps getting worse and the foreclosure crisis remains unabated.

According to industry analysts, the drop in home prices has pulled down values of properties in the East Bay area and neighboring regions in California. They said that this trend is expected to drive the number of bank foreclosed house on the market.

Market data showed that as much as two-thirds of the total homeowners in East Bay are finding their properties worth less than the mortgages they owe, thus the term negative equity. And the situation seems to have worsened in the second quarter of this year.

Analysts said that the situation in East Bay is consistent with the falling trend in home values. From April to June, an increasing number of homeowners in the counties of Contra Costa, Solano and San Joaquin were underwater or having properties that are worth less than their mortgage.

A modest trend in negative equity was observed in the counties of Alameda and San Mateo. Analysts said that the housing market is facing many risks right now, adding that negative equity will fuel more foreclosures. They said that a spread of foreclosure would mean an increase in inventory that would pull down home prices.

Beacon Economics regional research director Brad Kemp said that the deteriorating home equity indicated that the residential market in the region is not improving but rather continues to erode.

Industry analysts said that the rising unemployment rate is a major contributor to the deterioration of the housing market, adding that as more people are being laid off, many would not be able to pay their mortgages, driving foreclosures up and home prices down.

In Alameda County, houses that were less than the amount of mortgages accounted for 30 percent of total number of properties. In Contra Costa County, 45 percent were underwater, 63 percent in the county of Solano and 67 percent in the county of San Joaquin.

University of the Pacific’s Business Forecasting Center director Jeffrey Michael said that if a property has negative equity it can cause a flood of foreclosures because it lowers homeowners’ incentives to pay their mortgages.

He added that even if there is an improvement in the job market, the foreclosure problem will remain if home equity will not start to pick up.

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