Fewer American homeowners were underwater on their mortgage(s) during the third quarter, according to the latest Zillow Real Estate Market Reports.
The number of single-family homes with mortgages experiencing negative equity fell to 21 percent from 23 percent a quarter earlier as home prices experienced what they call short-term stabilization.
Year-over-year home values fell for the 11th consecutive quarter, slipping 6.9 percent, but the rate of decline improved for the third straight quarter.
“The decline in the percentage of homeowners with negative equity is a positive sign, and is directly attributable to the stabilization of home values from the second quarter to the third,” said Zillow Chief Economist Stan Humphries, in a release.
“It is also attributable to many homeowners who were previously underwater on their mortgage losing their homes to foreclosure.
Indeed, foreclosure resales made up more than one-fifth of all U.S. home sales in September, and 26.9 percent of home sales sold for less than what the seller originally paid.
And there’s still plenty of market manipulation, which certainly skews data and ultimately comes with a cost somewhere down the road.
Humphries noted that the extension of the homebuyer tax credit should “bump” demand and partially offset the increased supply of foreclosures during what could be a very cold winter.
However, he added that the artificial demand we are paying for in tax credits may result in weaker-than-normal demand once the incentive expires next year.