Upside Down Mortgages Contribute to Existing Home Sales
Even though existing home sales got a bit of a boost in February, the same housing trend did not carry over to new home sales. Instead, new home sales saw a decline. Some feel that this is a sign that the housing market will continue to weigh on the economy, reports Bloomberg:
Federal Reserve policy makers said last week that the economic outlook had worsened and the “deepening of the housing contraction” was one factor likely to hurt growth in coming months.
The fact that existing home sales are on the rise speaks to foreclosures and motivated sellers trying to get out from under their homes — possibly before foreclosure becomes a problem. Indeed, this is an increasing problem as more and more homeowners find themselves “upside down” with their mortgages. The Associated Press reports that the number of upside down mortgages has reached an all-time high:
Nearly 9 million households now have upside-down mortgages, and for the first time ever, aggregate mortgage debt is bigger than the total value of homeowner equity — bigger by $836 billion, according to research by Merrill Lynch.
All of this could mean that now could be a good time to buy, if you plan to keep the house for an extended period of time. But there are still hoops to jump. First of all, you need to have an improved credit score. Second, a down payment is required. And more mortgage lenders are requiring better proof of income.
So, even though the homes are out there, and many of them are at good prices, some would-be buyers are having trouble qualifying. This is another reason that existing home sales are doing better than new home sales. They cost less, and are therefore easier to qualify for.
Tags: upside down mortgages, existing home sales, home mortgage loan, mortgage loan blog,
housing market, housing trend, new home sales
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