Home News Falling home prices and rising interest rates are pushing 275,000 borrowers into negative equity

Falling home prices and rising interest rates are pushing 275,000 borrowers into negative equity

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Home prices across the country plunged 4%, the biggest drop in 11 years, with hundreds of thousands of homeowners at risk of submergence and the West Coast hit hardest.

  • Home prices fall for first time in 31 months in June-July
  • Properties along the West Coast see prices drop by more than 4%
  • San Jose, Seattle, San Francisco, San Diego, Los Angeles, and Denver see sharp declines in value
  • The Federal Reserve looks set to raise interest rates by another 0.75 percentage points this month to keep inflation in check.
  • 275,000 renters will be submerged if house prices drop another 5%
  • Investors who bought on the West Coast in the first half of 2022 are most at risk of negative equity

Nationwide home prices plunged 4%, the biggest drop in 11 years, with hundreds of thousands of renters at risk of submergence and buyers along the West Coast being hit hardest.

Mortgage analysis firm Black Knight Recorded Median home prices fell 0.77% nationwide from June to July. That’s the biggest drop since his January 2011 release in this week’s latest monthly mortgage report.

More than 85% of America’s largest real estate market is at least slightly off its peak, with more than 1 in 10 (mostly along the West Coast) seeing prices drop by 4% or more.

The company’s president, Ben Graboske, for the 31st consecutive month price hike It ended in July. He warned that the property market was characterized by “volatility and rapid change”.

San Jose, California’s tech hub, saw the biggest decline in home prices, where homes lost 10% of their value in three months.

More than 1 in 10 homes have lost 4% or more in value since the market peaked. Mainly along the west coast.

San Jose, California's tech hub, saw the biggest decline in home prices, with homes there losing 10% of their value in three months.

San Jose, California’s tech hub, saw the biggest decline in home prices, with homes there losing 10% of their value in three months.

During the same period, Seattle (7.7%), San Francisco (7.4%), San Diego (5.6%), Los Angeles (4.3%) and Denver (4.2%) also saw significant declines.

Real estate prices along the West Coast’s metropolitan areas are falling because of over-marketing, as people leave due to high crime rates, taxes and environmental issues such as droughts and wildfires. understood.

Technology companies headquartered along the West Coast have taken the lead in enabling employees to continue working from home even after the pandemic subsides, freeing many of them from having to live close to their offices.

The report provides a grim forecast for the hundreds of thousands of borrowers who bought during the market peak in the first half of 2022 and are now seeing prices fall as mortgage rates rise.

Prices fell amid the recent surge in mortgage rates. The current interest rate for a 30-year fixed-rate mortgage is 5.66%, up nearly 3 percentage points from the same period last year, according to federal lender Freddie Mac.

The Federal Reserve is poised to raise interest rates by another 0.75% this month to keep inflation in check.

A further 5% drop in house prices would submerge 275,000 borrowers and 0.9% of homes (also known as negative equity). If the amount they owe exceeds the property’s fair market value, researchers say.

A 5% drop in home prices would submerge 275,000 renters and 0.9% of homes. This is also known as negative capital.

A 5% drop in home prices would submerge 275,000 renters and 0.9% of homes. This is also known as negative capital.

A flat 10% drop in values ​​would push negative rates up to 1.9%, while a 15% plunge would drown 3.7% of borrowers, the report said.

Still, researchers say the housing market has fallen from its long-term highs and is “in a strong position to absorb such price declines.”

“As we have seen, such price declines will not be seen nationwide, but will be concentrated in specific markets. Look at the West Coast of the United States,” the study said.

Still, concerned property owners have taken to social media to voice their fears of slipping in the water. One user warned that rising interest rates are “devastating to young families” who have only recently been able to climb the real estate ladder.

Another asked how many borrowers would “sink quickly” due to falling prices and rising interest rates, while another said “again in 2008”, market collapses, defaults, Warned about eviction.

Goldman Sachs economists recently warned that house price growth is expected to stall completely across the United States next year due to declining demand and too many properties to buy.

Moody’s Analytics chief economist Mark Zandy warned last month that if a recession hits, house prices could fall by up to 20% next year, and prices are overvalued by up to 72% in some countries. did.

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