Fewer metro Atlanta homeowners saddled with underwater mortgages

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Fewer metro Atlanta homeowners owed more on their homes in the third quarter than the properties were worth, an indication that more are benefiting from rising values, according to a new report by the real estate site

The online real estate listing service’s latest report on underwater mortgages showed 402,125 metro homeowners, or about 38 percent, were dealing with “negative equity” in July, August and September. The share is less than the 44 percent underwater in the second quarter and the all-time high of 55 percent in the first quarter of 2012.

Metro Atlanta, however, still ranked No. 2 among large metropolitan areas with the highest negative equity rates in the third quarter, behind Las Vegas. The metro area was among the hardest during the housing bust that began in 2008, which left the area awash in foreclosures and declining home values.

With the rebounding economy, however, and big investors’ snapping up foreclosures at a quick clip, the city has seen a rapid decline in the number of distressed properties, a tighter supply of homes on the market and a jump in values.

In January, the average resale price for a home in the 22-county metro area was $155,000, according to real estate data provided by SmartNumbers. Today the average is around $220,000, which is only about $12,000 below its all-time high set in October 2006.

John Hunt, a real estate analyst at SmartNumbers, said it may not be until next spring, however, when metro homeowners really feel comfortable enough to list their homes, which would ease the market shortage. Hunt said many prospective sellers are still trying to process the quick housing recovery and how they might benefit.

”It’s just going to take time to change people’s psyche,” Hunt said.

The housing recovery remains strongest in five counties: Cobb, North Fulton, Cherokee, Forsyth and Gwinnett. The rebound, however, is also occurring across all 22 metro counties, even in Clayton, which was one of the hardest hit by foreclosures.

“The county with the lowest month of supply for housing stock is actually Clayton,” Hunt said. “We’ve finally turned the corner.”

Rising equity is another sign of the turnaround, but many homeowners still find themselves underwater, with more than one in five American homeowners in this situation, Zillow said.

Zillow Chief economist Stan Humphries said lenders’ willingness to embrace short sales, which allows troubled properties to be sold despite the negative equity, is contributing to a drop in underwater loans. Borrowers, however, can still find themselves on the hook for the difference when the sale doesn’t cover the balance on the loan.

“Short sales will remain a persistent feature of the market as many homeowners remain too far underwater for reasonable price appreciation alone to help,” Humphries said in releasing the Zillow data.

The listing service expects the national negative equity rate, which was nearly 24 percent in the third quarter, to fall to 18.8 percent by the third quarter of 2014.

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