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Study: Bay Area Homeowners Facing Negative Equity

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Nov 12, 2008 2:10 pm US/Pacific

Study: Bay Area Homeowners Facing Negative Equity

SAN FRANCISCO (CBS 5 / KCBS) ―

Click to enlarge 1 of 1: A sign indicating a reduced price is posted in front of a home for sale in East Palo Alto.
AP

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A new survey finds one-fifth of Bay Area homeowners owe more on their mortgages than their houses are worth.

The real estate website Zillow.com finds the number of homeowners with negative equity in the Bay Area is much higher than the national average of 14 percent.

Buyers who paid way too much for a now devalued home find themselves operating on a razor thin budget, and have a much greater risk of receiving a default notice and entering foreclosure.

Selling, or even just refinancing, in the event of a job loss or major illness can be very difficult with an upside down home. The publisher of Inside Mortgage Finance, Guy Cecala, said that explains why so many lenders are rolling out loan adjustment programs even for homeowners who have yet to become delinquent.

"The FDIC approach is to not handle mortgage problems on a case by case basis, but rather reach out and handle a thousand mortgages at a time instead of one mortgage at a time," he told CBS.

The so-called underwater rate in the Bay Area goes from about 7 percent in San Francisco to more than 38 percent in Solano County.

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