Denver homes - Nearly a third of homeowners who have purchased a home in the metro Denver area in the past five years owe more on them than what they would sell for. Denver ranked 41st out of 163 metro markets for its percentage of homes with negative equity. Of the 425,000 homes purchased in the past five years in the metro area, 144,000 are underwater.
The problem is a result of overbuilding in a superheated housing market as easy mortgage money was extended, beginning around 2003, to people unable to repay over the long term. Subprime mortgages, in particular, have gone bad in massive numbers over the past two years, tanking the housing, credit and stock markets and throwing the country into a deep recession.
Metro Denver, including Arapahoe, Adams, Jefferson, Douglas, Denver and Broomfield counties, didn’t experience the huge run-up in home values seen in areas such as Florida, Nevada and California this decade, resulting in smaller price declines. Recently estimates in the metro Denver, home values are down on average 7.5 percent from their peak value during the second quarter of 2007.
Had recent buyers followed the practice of past generations and put 20 percent or even 10 percent down, they might be able to ride out that kind of downturn.
But low or no down payments were common until last year, leaving recent buyers in a much tougher spot than the 30 percent of homeowners, mostly older and more fiscally conservative, who have paid off their mortgages. The most underwater ZIP code in the metro area is 80018 in Aurora, where nearly 65 percent of homes bought in the past five years have negative equity. There are another 14 ZIP codes, mostly in Adams County, where half or more of recent purchases are underwater.
Declining home values, the need to pay a 5 percent to 6 percent real estate commission to sell and covering the concessions that buyers are now demanding have left many sellers trapped with no easy way out. Not only must home sellers come up with thousands of dollars to close a sale, they must then come up with the 20 percent down payments conventional lenders are now demanding to buy the next home.Â
There are two paths out from negative equity for those who can’t wait for a market recovery. The first is a short sale, and the second is a loan modification, where a lender agrees to rework the terms of a loan so an owner can stay in the property.
The Colorado Division of Real Estate warned loan modifiers this month that they must be licensed as mortgage brokers with the state. Some loan modifiers are taking thousands of dollars of fees upfront from desperate homeowners and not getting the loans modified, said division spokesman Zachary Urban. Others are telling homeowners to send them their mortgage payments, which they pocket, or are advising them to miss payments, he said.
Posted by: Jeffery McClintock
Categories:
