28.9 percent of mortgages in Pierce County are underwater

Nearly a third of all Tacoma-area homeowners with a mortgage owe more than their property is worth.

The analytic and business services company CoreLogic reported this week that in the Tacoma “Core-Based Statistical Area,” a metropolitan area that comprises Pierce County, 28.9 percent of all residential properties were in “negative equity” for the third quarter.

This compares with 28.7 percent of such properties that were “underwater” during the second quarter, CoreLogic said.

In the Olympia and the Thurston County area, the company said, 18 percent of mortgaged properties were underwater in the third quarter. This compares with 18.2 percent recorded the quarter before.

Nationwide, 22.1 percent of mortgaged properties were in negative equity.

Nevada recorded the highest rate, with 58 percent of all mortgaged properties underwater. Arizona, Florida, Michigan and Georgia followed. Washington, with 17.3 percent of properties in the negative, ranked 16th in the nation, placing it between New Hampshire and Oregon.

“I think it’s certainly a trend that’s going in the wrong direction. It’s probably as much a reflection on the overall economy as anything else,” said Mike Larson, owner-broker at Allen Realtors and president of the Tacoma-Pierce County Association of Realtors.

Statewide, 245,694 mortgages were in negative territory – from a total of 1.42 million mortgages overall in the state.

Across the country, 10.7 million mortgages were underwater, from a total of 48.5 million mortgages.

“As long as there’s a reluctance or a hesitation to buy, the values are going to continue to erode. As values erode, the number of people who are upside-down will increase,” Larson said.

Many of the homeowners whose mortgages are affected purchased their properties within the last decade.

“Values have gone back to 2003 levels. The values have gone back to where pricing was eight years ago,” said Kevin Tinsley, owner of All Tech Mortgage of Lakewood.

“Anyone who purchased a home, those people are underwater,” he said.

Noting the number of foreclosed properties, the number of homeowners who were upside-down and “the number who can’t really sell, who don’t have any equity.”

Tinsley said he expects “another three to five years of this.”

“I think you have to have another new base of buyers. You’ve got about five to six years that it takes for those buyers to get in and get equity – you need those people who are ready to move up,” he said.

And it’s not just the people who bought. “It’s also people who refinanced,” he said.

Still, the times are good for potential homebuyers.

“Talk about the perfect storm for a buyer,” said Larson. “There’s available money, motivated sellers and a lot of homes from which to choose.”

Rates remain historically low, hovering around 4 percent for 30-year mortgages.

“It’s a great time to buy. There are so many good values, incredibly good interest rates – for people with a stable income, it’s a great time,” said Craig Hill, incoming president of the Realtors’ association.

“We’re getting close to the bottom,” he said. “We’re seeing more units sell. We’re seeing inventory starting to reduce. It gives me encouragement that we’re not in free-fall any more.”

“There’s not going to be a bell that rings when we hit bottom. Those who can buy now are missing out on an historic time,” Larson said.

Hill said he expects the problem of homeowners with upside-down loans “is going to remain with us for a while. People bought houses at incredibly high prices. The market has backed up – we’ve gone backwards, over 40 percent in some areas. Values have backed up that much. There’s not a simple answer to it.”

Tinsley said he heard form a homeowner who purchased a property on American Lake for $900,000, and a recent appraisal came back at $600,000.

Larson said that he himself bought a trio of four-plexes during the high times, “and it seemed like the right thing to do, and I’m in the business.”

The blame for the situation, if there is there is blame to assign, can be broadly spread, Larson said.

“Bankers who created derivatives, to appraisers that established the values that were clearly inflated and artificial, to people in my industry as well,” he said.

“Until there’s something to stimulate the housing market that gets people off the fence, it’s probably going to stay the way it is” he said.

Tinsley said there are several programs aimed at assisting people whose loans are upside-down or otherwise troubled.

“FHA, VA, there’s lots of programs,” he said.

The programs may or may not affect the loans that are upside-down in Tacoma.

Said Hill, “For people who are upside-down, it’s not a good situation.”

The proportion of U.S. households that own homes is at 65.1 percent, the lowest point since 1996, according to the U.S. Census Bureau. That marks a shift after nearly two decades in which home ownership grew before peaking at 70 percent during the housing boom. First-time buyers usually account for up to half of all sales. Over the past year, they have accounted for only about a third.

“It’s no longer the American Dream for the younger generation,” said Dan McCue, research manager at Harvard University’s Joint Center for Housing Research.

The Associated Press contributed to this report.

C.R. Roberts: 253-597-8535

c.r.roberts@thenewestribune.com