On May 14, the San Francisco Examiner reported that “the percentage of ‘underwater’ homes worth less than they are mortgaged for rose sharply in San Mateo County in the first quarter of this year.”
Negative equity – that’s the lingo in Economics World for being underwater on your mortgage – rose to 17.5 percent of all homes with mortgages in Q1 2011. Last year, 11 percent of County homeowners owed more than their homes were worth. Ugly numbers, no matter how you spin them.
Widespread numbers, also -- this phenomenon is by no means limited to San Mateo County, to the Bay Area or even to California. In fact, if you want to ease your anxiety a bit, consider that our numbers are much lower than those of other U.S. regions.
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According to Zillow, 28.4 percent of American mortgage holders are under water. Sixty-eight percent of all single-family homes in Phoenix, Arizona have negative equity, which is just one more reason to not live in Phoenix, Arizona, as far as I’m concerned.
Last September, the San Francisco Business Times reported 33 percent of mortgaged properties in California had negative equity. San Mateo’s 17.5 percent doesn’t seem so bad now, does it? Heck, in Miami, Florida, a full 25 percent of all mortgages are not only under water – they’re “in serious distress and headed for either foreclosure or short sale.”
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What’s the big deal about underwater mortgages? They’re considered to be pretty accurate harbingers of short sales and foreclosures to come, which mystifies me, a person who thinks of a house as primarily a home and secondarily an investment. While a maddeningly frustrating position to be in, carrying a negative equity isn’t, on its own, a sure path to personal economic ruin.
That homeowners are beginning to walk away from bad mortgages even if their payments are affordable and up-to-date speaks to a level of financial sophistication that escapes me. Downward trends don’t last forever; if you can pay your mortgage and you like your house, stay in it.
And I wonder why all my calls to the editors of Inc. and Forbes never get returned.
One of the challenges posed by our changed economic world is sifting through the blizzard of information that comes at us round-the-clock. On any given day we can log onto various web sites and read various print publications that will – gleefully – share with us the most heinous elements of the economic downturn, each prediction for the future more dire than the last. One of the common mistakes we make is to assume that the information (and opinions) disseminated by regional or national publications is directly relevant to our local reality.
Burlingame is part of San Mateo County, but it does not always follow the trends of the county at large. There’s a saying in real estate –“all real estate is local” – that carries great significance for the City of Trees. It makes no sense to look toward Phoenix, Miami or even boom/bust California towns like Temecula and Tracy for clues about the Burlingame housing market. Here, foreclosures were actually slightly down during the first three months of 2011.
The local market has its share of sob stories. For April, the average value of a property sold in Burlingame was $1.29 milion, down about 7 percent from April, 2010 but up 16 percent from March, 2011. Total sales have risen 50 percent since January and average days on market (DOM) shrunk to 38 last month, a reduction of 24 percent year-over-year.
As always, I counsel to buy and hold, and if your mortgage dips below the surface, don’t panic. If you have the means, and you’re happy living where you live, a long-view strategy will save the day.
