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May 9, 2008 7:16 pm US/Eastern
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Upside Down Mortgages Take Hold
Homes now worth less than the mortgage being paid
Over 70% have upside down value
DORAL, FL (CBS4) ―
If you're one of the thousands of South Florida residents who have bought a house in the past few years, a new study will probably shake your foundation. A new study shows homeowners who bought their homes recently are most likely "upside down" in their mortgages.
The term refers to homeowners who owe more on their mortgage than the home is actually worth. Appraisers will admit the price given today will more than likely be different tomorrow.
"It's just do you want to take the gamble of buying the property and it going down further possible, or not being able to do anything with it," property appraiser Michael Gomez said.
The study, from
Zillow, showed homeowners who bought a house in the last year run a 71% chance your mortgage is upside down. If your home was bought in the last two years, the likelihood of your mortgage being upside down jumps to 77%.
But Joseph Castaneda, of Home Appraisals, Inc, believes the Zillow numbers may be underestimating the drop by counting only what is sold. "We've experienced a 20% drop in values over the past year. So if someone put down 20% or less, that equity has been wiped away," Castaneda away.
For homeowners like Adele Booza of Cutler Bay, the real estate collapse has forced her to make some difficult decisions. She and her husband were planning to move to South Carolina in November and put their home on the market. The home sat on the market for four months and in that time, "No one came to see the house, ever. I was very surprised. Even in my listings that I had put up, I'd put the house was on the news and I though for sure I was going to get calls, and nothing," Adele said.
In a common move during the current home market collapse, the bank changed their down payment on the home they were building in South Carolina from 5% to 20%. That change forced the Booza family to stay here in South Florida.
The news for sellers may not be improving much, as both appraisers CBS4 spoke with believe bigger price drops are on the horizon. The reasons behind the rise are foreclosures and developers. For example, banks and developers are putting up homes for $80,000 that might be exactly the same as your home that should be worth $200,000, which is great news for buyers, but horrible news for owners.
(© MMVIII, CBS Broadcasting Inc. All Rights Reserved.)