Underwater Mortgages in Metro Outpace Nat’l Average
The percentage of metro-area homeowners who are underwater on their mortgages is higher than the national average by a notable margin—and the high percentage is keeping the number of local homes for sale at historically low levels, according to a new report that analyzed local real estate trends in April.
The percentage of local residents who owe more on their mortgages than the price for which they could sell their homes is 5 to 15 percentage points higher than the U.S. average, according to the Residential Real Estate Price Report Index, a monthly analysis of the 13-county metro area that’s prepared by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business.
The U.S. average for underwater homes is 25.4 percent. In the eight Minnesota counties for which data is available, the percentages of residents for whom that’s the case are: Carver, 29 percent; Washington, 31 percent; Hennepin, 32 percent; Ramsey, 33 percent; Scott, 36 percent; Dakota, 37 percent; Chisago, 41 percent; and Sherburne, 44 percent.
“Until this situation improves, the Twin Cities market will continue to see historically low numbers of homes available for sale,” Herb Tousley, director of real estate programs at the University of St. Thomas, said in a statement. “Increasing median sale prices will improve homeowners’ equity positions and many more will emerge from negative equity and no longer be underwater.”
In April, there were 13,204 homes for sale in the metro area, representing a 29 percent decrease from the number of homes available in April 2012, according to the real estate report. Since the beginning of 2012, the inventory of available homes has consistently been running 25 to 30 percent below the level for the same time the prior year.
“As more homeowners begin to have equity, they will be able to list their homes for sale, resulting in a more normal number of homes for sale and the market achieving a healthier balance between buyers and sellers,” Tousley said in a statement.
April’s median price of a non-distressed home in the metro area (or one that isn’t a foreclosure or short sale) was $216,250—2.4 percent higher than in March 2013 and 8.7 percent higher than in April 2012. Meanwhile, 4,185 sales closed in April of this year, up 11.8 percent as compared to March 2013 and up 6.5 percent from the same time last year.
Although distressed sales within the metro area still outpace the national average, they are decreasing in prevalence. In April 2012, there were 28 percent of such sales nationally and 42.7 percent locally. By contrast, in April of this year, 18 percent of national sales and 31.6 percent of local sales were foreclosures or short sales.
The percentage of distressed sales in the Twin Cities region has been on the decline since January.