More than half of homeowners with a mortgage in metro Atlanta owe more than the house is worth, a new report says.
Their negative equity will slow a real estate recovery as some homeowners who would like to sell and move are "trapped in their homes," because they cannot afford to sell at a loss, said Zillow's chief economist Stan Humphries. It also makes foreclosure more likely if the mortgagee loses a job or hits other economic shocks, he said.
Zillow, the online real estate data and search firm, analyzed 35 million mortgages, including 778,870 in 22 metro Atlanta counties, to conclude 55 percent of mortgages here were in the negative range. That far exceeds the national average of 31 percent. Humphries pointed out that despite the high numbers, only 8 percent of metro Atlantans were delinquent on paying.
Employed homeowners who plan to stay in their homes long-term are not bothered as much by the "paper losses," he said, which makes the situation less dire.
"People should not think that 55 percent of homes are going to end up in foreclosure," Humphries said.
Homeowners who are feeling the effects are those who want to sell or must sell due to incidents such as a job relocation or financial strains.
"I met a guy for a rental this morning and he is walking from his 4,000-square-foot house because he [owes more than the house is worth]," said Atlanta Communities Real Estate broker Don Zahnle.
"He was saying, ‘I don’t think I can hang on long enough to make it through this.'"
Danielle Hale, director of housing statistics for the National Association of Realtors, said the problem was created when the recession and bursting housing bubble began pushing values down in 2007. People who bought after 2000 are more likely to have negative equity because they purchased at the height of market prices.
Values which have tumbled on average 39 percent in metro Atlanta.
Negative home equity can have other economic effects, Hale said. Some homeowners used their positive home equity to tap into loans for small businesses or college loans for children. Those loans are unavailable when home values fall below what an owner owes.
The Zillow study came out just at the national and Georgia real estate markets are beginning to show signs of life. Sales in nine metro counties from 2010 to 2011 were up about 12 percent, though prices remained depressed or flat.
The number of permits for new home construction has been rising modestly in metro counties and home prices in some distressed markets such as Phoenix are beginning to rise.
However, the number of foreclosures on the Atlanta market and the number of homes with negative equity will rein in home values, Humphries said.
"People should not have expectations of a V-shaped recovery," he said, referring to a sharp rise after a sharp drop.
County // % Mortgages with negative equity// % Mortgages in default
Cobb 47.4 6.3
Cherokee 44.7 5.7
DeKalb 58.2 9.6
Fayette 33 6.6
Fulton 48.9 8.3
Gwinnett 58.5 8.9
Clayton 84.6 11.5
Henry 68.4 9.4
Source: Zillow
