Millions of homeowners are still having trouble with their mortgage payments, and a number of home sales this year have been made using only cash - skipping residential financing completely. The rate of foreclosed houses is high, and millions of people remain underwater. However, recent data indicated that many more are on track to gain some equity, possibly avoiding a short sale altogether.
Growing equity may help housing market
For some homeowners, the prospect of a short sale or a foreclosure is a daunting one. On a positive note, many people are seeing the light at the end of the tunnel. The recent U.S. Home Equity and Underwater Report, released by RealtyTrac, showed that more than 8 million borrowers are only slightly under or above water, opening up the possibility that they could sell over the next year or so. That figure comprises 18 percent of all U.S. homeowners.
Additionally, there are also more than 10 million people with a loan-to-value ratio greater than 125 percent, making them deeply underwater, according to the data. That segment accounts for 23 percent of all residential properties with a mortgage. States with the highest percentage of foreclosed houses with equity include Oklahoma, at 54 percent, Hawaii at 51 percent and New York at 47 percent. Texas followed close behind with 46 percent.
Several states also had a large volume of properties that were deeply underwater, with a loan-to-value ratio greater than 125 percent. Those included Nevada, with 46 percent, followed by Illinois, Florida, Michigan and Rhode Island. Those states could possibly be ideal destinations for real estate investors looking for affordable housing opportunities.
As more homeowners gain some level of equity, their chances of selling and ending up in more affordable situations increase.
"For the past few years, many people have been unable to sell their homes and upgrade due to lack of equity or in some cases negative equity," said Rich Cosner, president of Prudential California Realty. "With the tremendous growth in equity over the past year, many homeowners are now able to sell their homes and re-buy, which is a very positive outcome for the real estate market."
Cash purchases on the rise
Real estate investors have several tactics - such as buying without a mortgage - to find properties and turn a profit. Courthouse Retrieval System can offer accurate property data, real estate records and more for people who want to know as much as possible about an area.
Additionally, more than half of all homes sold between 2012 and the first half of 2013 were bought in cash, without financing, according to data from economists with the Goldman Sachs Group. Prior to the housing bubble, roughly 20 percent of all sales were completed in this fashion. Now, figures are much higher, increasing by greater than 30 percentage points.
Home sales have been steadily growing over the past few years, even though mortgage activity has remained relatively steady. All-cash purchases could account for some of this, according to The Wall Street Journal. Real estate investors, foreign buyers, and other homeowners could all combine to make up this statistic.