There’s a lot of confusion about how many borrowers are underwater in the U.S.
I have seen articles stating that the number is 11 million and Zillow recently reported that it’s more like 15 million borrowers last quarter.
What’s interesting is Zillow’s recent claim that 48% of all borrowers under age 40 are underwater.
That’s roughly double the number of older borrowers.
I can see how this might be true, especially based upon personal experiences with my clients.
Nearly all first-time buyers are under age 40 and few are flush with the cash needed for a substantial down payment.
That means they rely upon financing, such as FHA, that requires only 3.5% down.
Which, in turn, means they are instantly upside down the moment they close escrow.
Because they would pay commissions and closing costs roughly double their down payment if they sold immediately.
And, if they overpay for a home in a bidding war, or property values decline, they end up even further underwater.
We are fortunate to be in the Boise real estate market where we are experiencing a better than average recovery in our real estate market when compared to other areas of the country.
Nonetheless, we still have a substantial percentage of homeowners who remain underwater.
Those homeowners are often unable or unwilling to bring money to the closing table, so they hang on, hoping that rising prices will bail them out.
That’s one reason why our listing inventory remains so thin.
Source: CNNMoney.com article
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