The millions of foreclosures stemming from the Great Recession made for dramatic headlines. Now, the housing markets in many of the hardest-hit areas have recovered, and cities such as San Francisco, Los Angeles, and New York are even seeing record real-estate prices. Yet while the national housing market may be well on the way to recovery, the markets in some areas of the country are actually getting worse, according to a new report out from the Center for American Progress.
The report indicates that there are still more than seven million homeowners who are underwater in America—that is, they owe more on their homes than the homes are worth. In some 1,000 counties, the number of underwater homes is stagnant or increasing, threatening already struggling regions with the potential of more foreclosures, more empty and abandoned homes, and more people who opt to rent instead of buy, which drives up the price of apartments.
“It’s easy to say housing crisis is over but, for many parts of the country, it’s certainly not. The recession isn’t either,” said Sarah Edelman, one of the authors of the report.
When homes are underwater, their owners can’t draw on their home equity to invest in education or other big-ticket items. They also can’t rely on that equity as an option in the event of an emergency. It also makes selling their home an unappealing choice. Owners often cut back on spending and remain stuck in a state of limbo. As they wait for to see whether the banks foreclose, they often don’t know if they’ll be able to stay in their homes, or even rent an apartment in the same school district. A large number of homeowners with negative equity isn’t just bad for individual families, it can have profound implications for the economy, especially when it’s in as uncertain a state as it is now. A flood of foreclosures on the market can drive down values of other homes nearby, decreasing equity across a community.