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Housing Market Uptick Offers Little for Young Homeowners

Despite the modest housing market gains in the past 12 months, many younger borrowers are still likely to be underwater in their home mortgages, real estate experts recently said.

About half of all homeowners age 40 or younger own homes with negative equity – meaning more is owed on the home than it is worth, according to the real estate site  These younger borrowers are underwater in their mortgages because they have been in their homes for a shorter time and had less time to build equity before the housing-market crash, Zillow said in its second-quarter Negative Equity Report.

Zillow said that overall, 30.9 percent of homeowners were underwater in the second quarter of the year. That’s down from 31.4 percent in the first quarter. But analysts found that 48 percent of homeowners younger than 40 are underwater. The breakdown by age showed the startling age-bracket difference in underwater homes:

  • Age 20 to 24 — 39 percent
  • Age 25 to 29 ­— 48 percent
  • Age 30 to 34 — 51 percent

Older Homeowners More Likely to Be Delinquent

Analysts went on to say that mortgage delinquency, which is described as mortgage payments that are 90 days or more past due, are most common in the older age brackets, age 85 or older. “Negative equity is most common among homeowners who purchased their homes in 2006 and 2007, with about 53 percent of borrowers who purchased homes in those years underwater,” a Zillow analyst reported.

On a positive note, Zillow reported that many metropolitan areas housing markets have hit rock bottom, and some signs of home appreciation are emerging. Among them are Phoenix and California’s San Jose and San Francisco. Overall, Zillow economists forecast home values in the United States to increase by 1.1 percent by June 2013. It will be a slow crawl back to the top, analysts said.

Mortgage Rates Inch Up

At the same time, the average rate on a fixed mortgage has gone up slightly, but still remains at near-record lows. Freddie Mac reported that rates on a 30-year loan increased to 3.66 percent, which is up from 3.62 percent. Earlier this year, the rate was at 3.49 percent.

Experts say the low rates have driven more people to homeownership, which drives an increase in home selling prices. Sales of previously occupied homes rose 2.3 percent this summer.  With the supply of excess homes on the market slowly shrinking, the prices on new homes hitting the market are going up. This could mean good things for those homeowners who are underwater. With the increasing sale prices, they could see their own homes slowly resurface and possibly reach market value in the coming years.

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].

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    1. Gordon, M. (2012, August 23). Average on 30-year US mortgage up to 3.66 percent. Associate Press. Retrieved from
    2. Zillow Real Estate Research. (2012, August 22). Negative Equity Declines Slightly on the Back of Modest Home Value Gains. Retrieved from