One-Third of Homeowners Underwater ? Re-Create The Dream

According to Zillow?s Negative Equity Report released today, approximately one-third of all homeowners with a mortgage are underwater. As dismal as that sounds, only one in ten mortgage holders are behind on their payments. We can hope that means that the majority of underwater homeowners can still afford their payments and plan to ride out the storm and wait for their equity to return.

Whether a homeowner should short sale their home usually depends on a few factors, including:

1. How much underwater are we? 2.4 million homeowers (15% of the underwater mortgages) owe more than twice what their home is worth.

2. How many years will it take to be able to sell with equity? Assuming a 3% average appreciation, some of our clients may have to wait 15 plus years to sell with equity.

3. Can we afford our current payment? And does our overall budget allow for other expenses, medical care, college savings, retirement, etc.?

4. How do expiring tax laws impact our decision? With the uncertainly surrounding whether or not the Mortgage Debt Relief Act will be extended, many homeowners who do not short sale this year may be prevented from doing so in the future do to taxes that would be paid on their forgiven mortgages. This ?Cancellation of Debt? can be taxable unless you qualify for an exemption.

5. How long do we plan on staying in this house? With growing families or plans for retirement on the horizon, many homeowners only plan on keeping their homes for another 3 ? 4 years. If they won?t have equity for an estimated 10 years, they may be handcuffing themselves to their house longer than they planned.

With historically low amounts of inventory and higher demand matching 2005 levels, we hope we are seeing the start of our recovery, followed by reasonable appreciation that does not outpace other?economic indicators.

Nancy Moeller, CPA, Real Estate Broker

Seven Gables Real Estate

License #01727426

www.TheMoellerTeam.com

Direct: 714 276-7006

Fax: 714 917-2293

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Tags: hamp, harp, housing report, short sales

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