The percentage of home owners who owe more on their mortgages than their house is worth is a strong indicator of the strength of the housing market, and the economy in general. And I hate to be the bearer of bad news, but recent numbers of home owners who are “under water” (their homes are worth less than the balance of their mortgage) suggest that we’re not out of the woods yet.
The percentage of underwater homes in the U.S. remains high.
Recent statistics indicate that in over 1,000 counties across the U.S., the number of underwater homes is stable or increasing! Areas with a large percentage of underwater homes are subject to property empty and abandoned homes (zombie homes), and increased number of renters. Most importantly, these circumstances devalue homes, and further exacerbate the problem.
Aside from lowered property values, underwater home owners experience other collateral problems such as a lack of access to credit, and no emergency safety net in the case of a job loss or a medical issue.
Nationwide, the percentage of underwater homes is 15%, which is a fraction of what it was several years ago at the height of the Great Recession. But 15% is still very high. In the 1990s, that number was often below 5%.
How is Utah doing?
Unfortunately, not very well. More than 15% of homes are underwater in many counties throughout Utah – including ALL the counties along the Wasatch front, and over a half dozen Utah counties have greater than 20% of homes underwater!
How do underwater homes affect Utah bankruptcy?
In the big picture, underwater homes indicate an increased rate of bankruptcy filings. But it is not just an indicator of financial stress, it is a cause. The increased incidence of underwater homes devalues properties, sparking a self-perpetuating cycle that creates more underwater homes.
Having an underwater home, in itself, does not put you at risk of bankruptcy. If your income is still sufficient to pay your mortgage, you will be OK. The problem, in short, is that “life happens”. Many of my clients were doing just fine until their employer went out of business, or they had a serious medical problem that left them saddled with bills, and unable to work. These same clients may have stayed “above water” (no pun intended) if they had equity in their homes to fall back on. But with a home underwater…it’s just too much to bear without taking action.
If you’re like my other clients, there is hope! Whether through bankruptcy, or other non-bankruptcy options, we may be able to save your house and get you back on track.