Following July’s drop in sales throughout SoCal, many agents and brokers are beginning to fear that the second half of 2014 will turn into a bigger bust than first anticipated – but don’t lose all hope for 2014 just yet. A recent study has found that underwater mortgages throughout SoCal are on the decline – a clear indication of improvements being made throughout the market – and you may be surprised to hear who’s still hurting the most.
According to a new report from the real estate website Zillow, just 9.3% of homeowners in metro Los Angeles now owe more on their house than it is worth – barely half the rate a year ago and well below the national average of 17%. What may surprise you though is that of these loans, 45.8% are held by members of so-called “Generation X.”
Largely, this is a function of timing, said Skylar Olsen, an economist at Zillow who wrote the report. Baby Boomers and older buyers had more time to pay down debt and benefit from price run-ups before the housing crash. Younger buyers – Millennials – largely haven’t yet bought houses, but those who have benefited from low prices after the bust and likely made a large down payment. But Gen-Xers were entering prime home-buying years a decade ago, just as prices soared, then plunged.
“They were the ones who bought the most at the bubble,” Olsen said. “They’re your shoppers during those peak days. And they were hit the hardest.”
Los Angeles isn’t the only county where Gen-X has been hit the hardest. In Orange County, nearly half of all mortgages that are still “underwater” are held by homeowners aged 35 to 49.
But more borrowers of all ages are getting their heads back above the surface. At 9.3%, the share of homeowners with “negative equity” in the second quarter in metro Los Angeles sits at less than one-third of its peak from early 2012. By this time next year, Zillow projects, it’ll be 7%.
Do you think we’ll see further improvements throughout the remainder of 2014? What are your thoughts?
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