Homeowners With Negative Equity Helped By Rising Home Prices

14 Jan Homeowners With Negative Equity Helped By Rising Home Prices

According to a recent report by Capital Economics, homeowners with negative equity have been helped by rising home prices. Economists are hopeful that negative equity will continue to shrink in the coming months, assisting those who are underwater in their homes.

The report states, “The negative equity problem is still crippling many home owners and the wider economy.” Data suggests that 25% of homeowners still owe more than their home is worth, and nearly half fail to meet the 80% loan-to-value (LTV) ratio that is required to take advantage of a standard refinance. But rising prices are expected to assist in this part of the recovery, and despite these numbers, Capital Economics says they still see the potential for approximately 3.5 million home owners to rise above their negative equity issues in the coming year.

Of course, any uptick in housing prices is favorable for those with negative equity. While it remains to be seen just how high home prices will rise in 2013, Capital Economics has some forecasting. If home prices were to increase by 10%, nearly 3.5 million borrowers would be helped out of negative equity, while about 6 million would be eligible for standard refinancing. Adds Capital Economics, “The faster prices rebound, the quicker the negative equity problem will be resolved.”