New Homeowners Feel the Pain of Declining Home Values

Whether its stocks, bonds, commodities or real estate, buying at or near the top a price bubble seldom pays. Just ask millions of homeowners who bought houses and condos in 2006 and 2007. According to Zillow.com, 39 percent of homeowners who bought their homes in 2006 have negative equity, meaning that the value of their home is less than their mortgage balance. Thirty percent of 2007 home buyers have negative equity.

The rates of negative equity are highest in parts of California, Florida, Nevada and Arizona where down payments were low in the go-go years. In Las Vegas 72.5 percent of the 2006 home buyers and 57.6 percent of the 2007 home buyers are currently underwater.

Less than one percent of homeowners across the U.S. have negative equity, suggesting that if the latest group of home buyers can hang on, they should get above water in the future. But what a painful ride in the meantime.

Related Articles:

Anatomy of a Bubble Top
Homebuilding Stocks - Articles on buyupside.com
The Revenge of the McMansions

Posted February 13, 2008.