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The percentage of homeowners that owe more on their mortgages than their homes are worth declined in the second quarter of 2010, but few economists are breaking out the champagne. Zillow.com, a real estate data provider, reported a decline in the number of homeowners “underwater” with the current mortgage–21.5 percent, down from 23.2 percent, reported in the first quarter of 2010.
Housing experts, like Zillow’s Chief Economist Stan Humphries, point to two transient factors giving false glimmers of housing stability: California’s double tax credit incentive and high foreclosure volume.
California’s housing demand seems to have been temporarily spiked by the federal and state tax credit incentives. The Federal homebuyer tax credit could have been as much as $8000 with another potential $10,000 credit kicked in by the State of California. This is believed to be responsible for a lift in 20 or 26 California home markets.
The dark cloud on the data lies in the affect of a high volume of foreclosures. A large number of bank seizures are now cleaning out the inventory of underwater mortgages. Unfortunately, even this market trend is likely to be short lived as negative equity mortgages continue to fill housing inventory as a result of continued unemployment and a sustaining recessionary economy.
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