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‘Seriously underwater’ homes in Charlotte fall to 17%

The number of Charlotte-area homeowners who are “seriously underwater” keeps declining as home prices rise here and elsewhere, a new report shows.

A year ago, 23 percent of Charlotte-area homeowners with a mortgage were seriously underwater. But now that figure is 17 percent, driven lower by homeowners regaining equity in their properties as prices increase, according to Irvine, Calif.-based RealtyTrac, which released the report.

For Charlotte, a decline in those who are underwater could lead to more homes being put up for sale at a time when inventory in the region has been shrinking.

As people gain more equity in their homes, it raises their chances of being able to sell without going through a short sale.

“As the prices increase, they are less and less underwater,” said Jennifer Frontera, who last year was president of the Charlotte Regional Realtor Association.

While not all underwater homeowners might want to sell, she said, “the good news for those people, and the good news for Charlotte, is as our values continue to appreciate there will be more and more people who are able to put their home on the market.”

“There’ll be more inventory coming along,” Frontera said.

Of the 383,627 homes with an outstanding mortgage in the Charlotte region, 65,862 are seriously underwater, RealtyTrac says. That’s down from a year ago, when there were 83,411 seriously underwater homes out of 356,140 with an outstanding mortgage.

RealtyTrac defines a home as seriously underwater if the owner owes at least 25 percent more than a property is worth.

Daren Blomquist, vice president at RealtyTrac, attributes Charlotte’s decline primarily to appreciation, “especially given that the home price bubble was not as dramatic in Charlotte as in other parts of the country. That means homeowners were not as deeply underwater there and don’t need as much home price appreciation to move them out of the seriously underwater category.”

The number and percentage of seriously underwater homes in Charlotte has dropped “quite substantially” over the past year, he said.

Nationally, the number of seriously underwater homeowners is also on the decline. The figure is 10.7 million homeowners, or 23 percent, down from 28 percent a year ago.

Meanwhile, rising mortgage rates are motivating some potential buyers to hurry up and make a purchase before rates climb more, further straining supplies and putting more upward pressure on prices.

Nationwide, home prices are expected to continue climbing, suggesting that the number of underwater homes will fall further. According to the National Association of Realtors, in the U.S. the median existing-home price is projected to rise nearly 11 percent this year, slowing to a gain of 5 percent to 6 percent in 2014.

Mortgage rates, if they keep rising, could slow price increases.

According to the Charlotte Regional Realtor Association, homes in the region sold for, on average, $232,851 in July, up 5.9 percent from a year ago.

More homes to be sold?

The tight supply of homes for sale in the U.S., as well as in Charlotte, is said to be contributing to higher home prices.

In the Charlotte area, the number of homes for sale fell 18.8 percent in July from a year ago, to 14,805, according to the Realtor association. Charlotte-area real estate brokers say the lower supply is resulting in some potential buyers trying to outbid one another. They say some homes are selling for more than the seller’s original list price.

But more homes could be coming on the market in Charlotte, thanks to fewer homeowners being underwater.

According to RealtyTrac, 93,332 Charlotte-area homeowners are either slightly underwater or slightly above water, putting them on track to have enough equity to sell sometime in the next 15 months without resorting to a short sale.

Blomquist said 8.3 million U.S. homeowners with little or no equity are poised to regain enough to sell before 2015 – but only if home prices continue to increase at 1.33 percent per month, which they’ve done since “bottoming out” in March 2012.

Other reports have also shown a decline in the number of underwater homes in Charlotte.

In June a report from real estate data firm CoreLogic showed 13 percent of Charlotte-Gastonia-Rock Hill-area homeowners were underwater in the first quarter. That was down from 17.6 percent in the fourth quarter of last year and 18.8 percent in the first quarter of 2012.

Roberts: 704-358-5248; Twitter: @DeonERoberts
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