60,000 homebuyers 'going underwater'

28/12/2011

Some buyers are finding that their homes are worth less than the size of their mortgage.

While the percentage of home owners with so-called negative equity remains tiny - about one in fifty of the 3 million households with mortgages - the number may well swell in 2012 if home prices extend their declines as some analysts expect.

The emergence of a sector of the housing market "under water" on their mortgages may hurt an already fragile real estate market. Any forced sales would obviously dent individual household wealth but further drops in home prices would deter investors from buying residential properties.

Ben Phillips, principal research fellow at the National Centre for Social and Economic Modelling, helped prepare the analysis which pointed to 60,000 households nationwide with negative equity. "The prospect of negative returns will certainly detract from sentiment through 2012," said NATSEM's Mr Phillips.

Source: The Age