By Gino Blefari
President & CEO
Intero Real Estate Services, Inc.

Here’s a bit of fantastic news in the housing market: 8.3 million homeowners are about to resurface from the doldrums of negative equity.

Given the abysmal situation with lack of homes for sale in many markets nationwide, the takeaway from this news is that we could be looking at a lot more inventory becoming available by the beginning of 2015.

We hope.

According to RealtyTrac, 8.3 million homeowners, or about 18% of homeowners with mortgages, will gain enough equity to sell their homes in the next 15 months without resorting to short sales.

As you likely know from reading this column each week, millions of homeowners in the U.S. have essentially been “stuck” in their homes, waiting for the market to rebound and lift their home values from negative equity – the situation in which the owner owes more on their mortgage than the current market value of the home.

This hasn’t helped the inventory problem at all. In fact, it’s contributed too much of it.

RealtyTrac says in its September report that the 8.3 million homeowners have anywhere from 10% negative equity to 10% positive equity. They count the latter homeowners because even though these homeowners have equity, they don’t have enough to cover the costs of selling and therefore aren’t in the market.

This is great news for sure. But to keep the situation in context, we have to also remember the huge population of homeowners who have more than 25% negative equity. RealtyTrac says this population includes about 10.7 million homes, or about 23% of properties with a mortgage.

Their situation is more dire. And RealtyTrac’s data follows much of what Zillow announced a couple of weeks back. While the situation certainly is improving, there is still a segment of homeowners who aren’t likely to rise from their situation any time in the near future, if at all.

We’ve seen some pretty wild increases in home values this year, and many don’t expect those increases to continue at the current pace.

What’s a homeowner to do? As you know, there are a few options. Some homeowners will choose to foreclose and simply walk away and deal with the financial consequences. Others will simply stay in their homes as long as they’re able to afford the mortgage.

Either way, negative equity appears to be the tumor that will remain in tact in the market for years to come. It shouldn’t stop the market from improving as a whole, but it’s a reality of personal finances that could eventually catch up – mainly when thinking about available homes for sale.

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