Des Moines Real Estate Blog

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  • Adam Van Lin, Realtor
    Burnett Realty
    10200 Hickman Rd. #100
    Clive, Iowa 50325
    Cell 515.344.1068
    Fax 515.331.3401
    Licensed in Iowa

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Posts Tagged ‘negative equity’

12.8% of Residential Properties in Des Moines are Underwater

Posted by adamvanlin on September 13, 2011

According to CoreLogic, 12.8% of all residential properties with a mortgage were in negative equity for second quarter 2011.  An additional 8.1 percent, or 8,575, were in near negative equity in Des Moines-West Des Moines.

Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity mostly occurs because of a decline in value of the home.

High negative equity is holding back refinancing and sales activity and is a major impediment to the housing market recovery.  Those underwater are more likely to stop making payments and walk away from their home, adding to the foreclosure market.

How do we fix the problem?  John Hussman has been advocating for PARs for several years now.  According to Hussman,

“Suppose a $300,000 mortgage is in foreclosure (or the homeowner and lender can agree to the following arrangement outside of foreclosure court). A reasonable mortgage restructuring might be to cut the principal of the mortgage to $200,000, and to create a $100,000 PAR. The homeowner would agree to pay off the PAR to the Treasury (and administered through the IRS) out of future price appreciation on the existing home or subsequent property. The homeowner would be excluded from taking on any home equity loans or executing any “cash out” refinancings until the PAR was satisfied. The maximum PAR obligation accepted by the Treasury would be based on the value of the home and the income of the homeowner.”

Sounds better than anything else out there.

If you are underwater but would still like to move into a different house, give me a call and we can talk about your options.

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