If you are looking for a bargain on a new home, then buying a foreclosed home for sale will get you a house that is 20% less than normal value on average across the United States. Recently, studies showed that in Ohio, that discount is even higher, up to 41% in some cases. And you may think that at least you can get a bargain on a new house.
You would be absolutely right, except that the falling home equity values, coupled with the continued foreclosing of more homes, is a downward spiral that actually hurts everyone, including you, the home bargain hunter.
A study based on data from the first quarter of this year, shows that more than one in five Ohioans with a mortgage owe more than their home is worth. The study was conducted by a mortgage data firm, CoreLogic, to find out how many home owners were “under water” nationwide. Cleveland has an even higher percentage, 27.3%, of homeowners that owe more than their home is currently worth.
This is a problem that is occurring due to the discounted sales of foreclosed properties which is driving home values down. Until the majority of the foreclosed homes in Ohio are sold, Ohioans will continue to suffer from this loss of income. Falling real estate rates means that Americans own a smaller percentage of their homes than they have since World War II, according to the Federal Reserve. The average homeowner now has 38 percent equity, down from 61 percent a decade ago.
In a normal situation, home equity goes up as you pay off your mortgage, but right now while homeowners continue to pay off mortgages, their home value goes down, so that they own less and less of their homes. Many homeowners are battling foreclosure on a home that they are losing equity in.
It just doesn’t seem right that you can pay and pay on your home, and still not own it. Who owns it then? Is the bank the true owner of your property, or the lender?
Foreclosure sales have been delayed while federal regulators, state attorneys general and banks review how those foreclosures were carried out over the past two years. We all know that in addition to the problems of foreclosure, bankruptcy, and defaulted loans, there are numerous instances of mortgage fraud, and other instances where lenders have not really helped people who are trying to pay off their mortgage loans.
Home prices are expected to keep falling until the number of foreclosures for sale is reduced, companies start hiring in greater force, banks ease lending rules and more people think it makes financial sense again to buy a house. That is a lot of conditions that need to be met here in Ohio, where jobs are still hard to find, and companies are just trying to hold on to the status quo. Many Ohioans are still looking for jobs to replace the ones they lost when the economy fell.
So what does that mean for Ohioans? It feels like we are bailing out a sinking ship. Even when we pay our mortgages, we are still not the true owner of our property. No wonder so many people are in despair.