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USA Today: Underwater Homeowners Are Blocking Housing Recovery

By    |   Friday, 01 March 2013 08:08 AM

The number of would-be homebuyers is surging in the United States, but potential sellers, including “zombie” homeowners who cannot afford to get out of their mortgages, are helping to keep a lid on the market, according to USA Today.

The newspaper said tighter lending restrictions, a diminishing supply of distressed homes and underwater homeowners are all contributing to limit home sales growth.

The National Association of Realtors (NAR) said the supply of existing homes for sale in the U.S. has declined for seven straight months, and nearly hit an eight-year low in January.

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A bright spot is that the shortage of sellers is expected to ease as prices go higher, USA Today reported, as they are in some markets such as Atlanta and Seattle.

However, a return to healthy inventory levels could take years.

The United States now has a 4.2 month supply of existing homes for sale. A “healthy” market has a six-month to seven-month supply, which will arrive when the nation’s home prices rise another 20 percent, according to John Burns, CEO of John Burns Real Estate Consulting.

In the meantime, many homeowners are still equity poor.

Zillow estimated 28 percent of homeowners — or 13.8 million people — owe more on their mortgage than their home is worth.

An even larger percentage — 45 percent — has less than 20 percent equity. That much equity is often needed to sell, pay a realtor commission and have enough left over to buy again.

“They are stuck. They are zombies,” Mark Hanson, a California real estate consultant, told USA Today.

Federal Reserve Chairman Ben Bernanke was optimistic about the U.S. housing market in testimony in Washington, D.C., Wednesday, according to Bloomberg.

“The evidence thus far is that the housing market has hit the bottom,” Bernanke told members of the House Financial Services Committee. “It’s recovering. We’ve seen rising prices in the last year or so. We’ve seen significant increases in starts and sales.”

The index of pending home resales in January increased 4.5 percent to 105.9, the highest level since April 2010, from a drop of 1.9 percent the prior month, according to the NAR. The median forecast in a Bloomberg survey predicted a 1.9 percent advance.

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The number of would-be homebuyers is surging in the United States, but potential sellers, including “zombie” homeowners who cannot afford to get out of their mortgages, are helping to keep a lid on the market, according to USA Today.
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2013-08-01
Friday, 01 March 2013 08:08 AM
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