In a report out today by Zillow, there continue to be a large number of homeowners whose house is worth less than their mortgage, otherwise known as being “underwater”. The good news is the ratio of underwater homeowners has dropped to about 19% from 25% a year ago.
What’s the point? The “underwater” factor is a lingering vestige of the housing bubble and has multiple ramifications: reduces available housing inventory and thereby housing turnover/sales; maintains a negative for consumer psychology (lower “wealth effect”), that may be affecting consumer spending, which has grown in this recovery at about half the rate of post-WW2 average. We believe the underwater factor will continue to gradually improve along with healing in overall housing market and consumer spending. It may also have the effect of prolonging the current economic recovery.
Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140520&id=17635723
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