Why more American homeowners live in negative equity

Over 16 million American properties are in negative equity according to a new report from Seattle based company Zillow Inc.  As property in America continues to fall in value, increasing numbers of homeowners are finding that their outstanding mortgages are higher than the value of their property.

Bloomberg reports that the number of home owners finding themselves ‘underwater’ has risen to a staggering 16.1 million, or 28 per cent.

Falling house prices contribute to negative equity

The numbers of households in negative equity has risen by 6 per cent in the last twelve months with falling house prices mainly to blame.

Property prices in the USA have fallen by 8.2 per cent in the last year with 3 per cent of that fall happening in the first three months of 2011. House prices have dropped almost one third (30 per cent) since their peak in June 2006, equivalent to a staggering $10 trillion being wiped off the value of property.  House prices have fallen by a combined total of over $667 billion in 2011 alone.

Property prices in America expected to continue falling

For people looking to buy property in the USA, now may be a good time.  Whilst house prices may continue to fall in 2011 there are plenty of property bargains to be snapped up.

Stan Humphries, chief economist for Zillow, believes that house prices will fall by 9 per cent in 2011 whilst Morgan Stanley expects values to decrease by up to 11 per cent.

Mr Humphries told Bloomberg:  “In the past, people felt more bullish in a post-recession recovery.  They’d go out and spend more on homes and that would ignite hiring in construction and the mortgage industry. And they’d start to get the flywheel moving more quickly. Unfortunately, now, that flywheel is broken.”