Just a few years ago, many homeowners found themselves being underwater on their mortgage, the word used to describe owing more on the home than what it’s worth. Because of this, many people chose to simply stop paying their mortgages, leading to a significant rise in foreclosures, which did not help matters much in terms of boosting home values. Thankfully, recent reports show that homeowners are now in a much better position.
Close to a million homeowners are no longer underwater on their home loans, per reports released during the third quarter. Throughout the country, the negative home equity rate plunged to 13.4 percent of homeowners with a mortgage, down one percent from the previous quarter and lower than 2014’s 16.9 percent. History has shown that the typical negative equity rate tends to hover below 5 percent.
What’s causing the fewer amount of underwater mortgages? It’s the rapidly rising prices for homes. In October, home value gains increased by more than six percent when compared to 2014. In a mere three months, negative equity has been reduced by over $55 billion.
With these developments, a greater number of homeowners have the ability to refinance, but it’s important to remember that there are still many who are stuck in place and continue to face negative equity.