Nearly 1 in 3 homeowners with a mortgage in L.A. County owes more than the property is worth, new data show. These underwater loans hinder mobility and hurt prices because they tend to stymie the important move-up market.
Even as a tentative housing recovery in the Southland appears underway, a big stumbling block remains: the vast number of underwater homeowners.
Nearly 1 in 3 homeowners with a mortgage in Los Angeles County owes more on the loan than the property is worth, according to fresh data from real estate website Zillow. In the hard-hit Inland Empire, that climbs to more than half of borrowers.
In roughly 10% of Southern California cities, 1 of every 5 homeowners with a mortgage owes double the value of the house, according to the data, released Wednesday. As sales and prices improve, some economists expect homeowners who have been stuck in underwater properties to try to sell their homes, muting any significant price appreciation.
"Generally I think we are seeing strong signs of an emerging recovery in the housing market — in 2012 we are going to see strong sales growth," Zillow Chief Economist Stan Humphries said. But "generally our thesis is that the bottom is going to be a pretty long and rocky affair, and people shouldn't expect a V-shaped recovery. And we are not going back to the go-go years."
Underwater homeowners in Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego counties were a staggering $138.9 billion deep in negative equity at the end of the first quarter, Zillow reported. Nationally, underwater borrowers owe about $1.2 trillion more than what those properties are worth, Zillow estimates