Missouri Homes with Negative Equity Facing Bank Foreclosures

by on States

A growing number of homeowners in St. Louis, Missouri owe more mortgages on their houses than their total market value. This trend has been bothering industry analysts who noted that despite the affordable housing cost in the area, many borrowers are seeing their properties losing equity.

Analysts pointed out that negative equity is a precursor to more bank foreclosures as it is the tendency of troubled borrowers to walk away from their homes with negative equity rather than spend more money by keeping their accounts current.

According to results of a market study, 29.5 percent of homeowners in St. Louis were underwater, or their mortgages are more than the worth of their properties, in the second quarter of 2009. This means that 170,871 homeowners are at risk of foreclosure.

Additionally, 6.5 percent or 38,000 of homeowners are on the brink of getting into the negative equity position, meaning that they are within five percent of underwater level.

Industry analysts said that negative equity is becoming a serious problem in the housing market. They pointed out that negative equity positions are a major contributing factor to the growing foreclosure rate not just in Missouri but in the whole country.

They explained that negative equity, together with unemployment, will continue to be dominant driver in the mortgage market as it always leads to more foreclosure properties in the event that borrowers experience some economic problems such as illness or job loss.
They said that foreclosure risk will continue to rise until unemployment declines and negative equity recedes.

Analysts took consolation on other developments in the housing market. They noted that home prices appeared to be leveling off. This means that mortgages that are not underwater will have less chance of getting that way.

Meanwhile, analysts pointed out that the problem of negative equity and foreclosure is much worse in some areas in the country. In Nevada, two in three homeowners are underwater, and almost 50 percent of properties with loans in Florida, Arizona and Michigan having negative equity.

Nationwide, the number of properties with negative equity dropped slightly from 32.5 percent in the first three months of this year to 32.2 percent in the following three months. Additionally, 6 percent of all properties nationwide with loans are nearing the negative equity position.

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