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This is more poitive news for NYC real estate:

More U.S. Homeowners Have Mortgage Higher Than House Is Worth

By Dan Levy

Oct. 31 (Bloomberg) -- Almost 20 percent of U.S. mortgage borrowers owed more on their loans in the third quarter than their house was worth as foreclosures depressed prices and the economy weakened, according to First American CoreLogic.

More than 7.5 million properties already have negative equity and another 2.1 million will follow should home prices decline another 5 percent, Santa Ana, California-based First American, a seller of economic and real estate data, said in a report today. Six states account for almost 60 percent of homes with negative equity, led by Nevada and Michigan.

``As long as job losses continue and people face resets on their mortgages, the housing market will be under severe distress,'' Sam Khater, a senior economist at First American in Tysons Corner, Virginia, said in an interview. ``We've created an entire class of homeowner that is very sensitive to price changes.''

Home prices fell in August in all 20 metropolitan areas measured by the S&P/Case-Shiller home-price index, which dropped 16.6 percent from a year earlier and has fallen every month since January 2007. U.S. foreclosure filings rose to a record in the third quarter, and will probably increase as the economy worsens and the availability of financing shrinks, RealtyTrac Inc., a seller of default data, reported on Oct. 22.

The number of houses with loans higher than the property's value may increase to almost 25 percent should prices keep falling, First American said.

Economy Weakens

The economy suffered its biggest decline since 2001 in the third quarter, ushering in what may be the worst recession in a quarter-century. Polls show that economic turmoil is boosting the chances of presidential candidate Senator Barack Obama of Illinois and fellow Democrats in next week's elections.

Gross domestic product contracted at a 0.3 percent pace from July to September, according to a Commerce Department report yesterday in Washington. The decline was smaller than forecast. Even so, the economy may be in for a larger drop this quarter as the record two-decade expansion in consumer spending came to an end.

The weak economy has hurt Republican candidate Senator John McCain of Arizona, who fell further behind Obama as the financial crisis intensified. A Bloomberg/Los Angeles Times survey taken Aug. 15-18 showed McCain leading with 42 percent to Obama's 41 percent; five weeks later, the poll showed Obama ahead by 49 percent to 45 percent.

First American's home-price index, compiled from public property records that go back 30 years, showed a national drop of 11.2 percent in August from a year earlier. The rate of decline may increase to 12 percent by year end, Khater said.

Rescue Plan

A $500 billion plan under consideration by the U.S. Treasury and the Federal Deposit Insurance Corp. may help as many as 3 million homeowners in danger of default refinance their mortgages into affordable loans, people familiar with the matter said yesterday.

FDIC Chairman Sheila Bair acknowledged this week that ``a framework'' for modifications was being discussed.

The states with the highest shares of homes with negative equity either had rapid appreciation in prices, manufacturing declines or a higher proportions of subprime loans, according to First American.

Nevada had the highest share at 48 percent, followed by Michigan at 39 percent, Florida and Arizona each at 29 percent, California at 27 percent, Georgia at 23 percent and Ohio at 22 percent, First American said.

New York had the lowest share of homes with negative equity at 7 percent, followed by Hawaii at 8 percent, Pennsylvania at 9 percent and Montana at 10 percent, according to the report.

The negative equity report was compiled from 41.7 million first and second mortgages and covers single-family homes, cooperatives, condominiums, town homes and multiunit attached properties up to four units, Khater said.

http://www.bloomberg.com/apps/news?pid=20601206&sid=aYyk2_TLjGao&refer=realestate

Posted by: sebb at October 31, 2008 5:18 PM