Negative Equity

I haven't come across very many houses in Chapel Hill where the owners owe more than the asking. Generally, this is a good thing for the owners and for the town, but the bear in me who wants to see a return to normal home pricing would prefer to see foreclosures and strategic-defaults which would flush out all the bad debt in the system quickly. Instead, it looks like housing will be a drain on the economy for the next several years.

This was a big day for mortgage data. First: a link to CR, who today posted a graph of the negative equity populations for all 50 states; NC ranked 38th (lower rank meaning higher %age of negative equity). Overall, 23% of mortgage holders are underwater.

Case-Shiller was up again for October, as it was for September. This is both a shock given the last year and a half of consistent declines, and given the a-seasonality of the uptick. September and October are usually cooling periods where volume drops considerably from the summer month highs.

Most believe that the boost in price and volume for the past two months was due to first-time homebuyers rushing to beat the Nov 30th deadline for the homebuyer's tax credit (which was extended). This borrowing forward of future demand should depress volume until we near the April deadline. I am expecting November volume to come in very low. We'll see.