Number of houses in U.S. with negative equity rises

http://www.stltoday.com/business/local/article_0a3b1fcd-4ccb-5369-9366-33a3a12fa5f8.html

The number of U.S. houses worth less than their outstanding mortgage jumped in the fourth quarter as prices fell and lenders seized fewer properties from delinquent borrowers, according to Zillow Inc.

About 15.7 million homeowners had negative equity, also known as being underwater, at the end of the year, up from 13.9 million in the previous three months, the Seattle-based real estate information company said Wednesday. The total represented 27 percent of mortgaged single-family houses, the highest in Zillow data dating to the first quarter of 2009.

In the St. Louis area, more than a third of houses had negative equity, according to Zillow.

House prices are dropping as foreclosed properties sell at discounts and 9 percent unemployment at limits buyer demand. Values will fall as much as 5 percent this year, putting more homeowners underwater, before finding a floor as the economy improves, said Stan Humphries, Zillow's chief economist.

"These seem like fairly grim numbers," Humphries said. "We're still expecting a bottom in home values later this year. And this, if anything, makes me a bit more confident because I'm seeing very large corrections now, which means the market can start to repair itself."

The median value for a U.S. single-family house was $175,200 in the fourth quarter, down 2.6 percent from the end of September and 5.9 percent from a year earlier, according to Zillow. Values have fallen 27 percent from their June 2006 peak.

Foreclosures slowed in the fourth quarter as lenders including Bank of America Corp. halted some house seizures after accusations they used improper processes. Attorneys general in all 50 states are investigating.

Lenders also are taking more time to take over properties as they are overwhelmed with defaults. Homeowners in the foreclosure process in December were an average 507 days delinquent on payments, 25 percent longer than a year earlier, Lender Processing Services Inc. reported this week.

The total value of U.S. single-family houses tumbled about $798 billion in the fourth quarter, according to Zillow. For the year, values fell by more than $2 trillion to $22.3 trillion. Zillow's estimates exclude houses resold after foreclosure, when prices are usually at least 20 percent less than similar properties, he said.

In metro St. Louis, more than 1 in 3 mortgage holders owe more than their house is worth, according to Zillow.

The share of underwater borrowers surged in the fourth quarter of 2010, to 33.9 percent in the region, up from 22.2 percent in the third quarter, as house prices fell and foreclosures slowed.

A separate report out Wednesday from RealtyTrac found that foreclosure filings in the region rose 16 percent in January compared to the same month last year.