Many Younger NJ Homeowners Are Stuck Underwater [AUDIO]
A new survey by Zillow, the online real estate database, finds 48 percent of younger homeowners under the age of 40 owe more on their mortgage than their home is worth, because many of them bought at the height of the housing boom around 8 years ago.
Pat O’Keefe, Director of Economic Research at JH Cohn, is alarmed by the news.
He says, “Those under 40 are at a critical juncture in their economic careers. When we’re in our 30′s, that’s when can make job changes, we can begin saving for the future – and those who are housing hostages. And that’s what we’re really talking about here – don’t have the same flexibility to move from one location to another in pursuit of employment.”
He says, “Because their primary asset – their house – is in a negative equity situation, they’re also not accumulating wealth in the same way that the boomer generation did…And it’s also problematic because the individuals are confronted with a situation where – as they continue to pay their mortgage. They’re not accumulating net worth, what they’re doing is they’re paying on an asset which for the foreseeable future be worth less than it can obtain on the market…If they do sell, it means that when they go to the closing, they have to bring a check, rather than walk away with a check, which historically had been the case.”
O’Keefe also points out this is a drag on the economy overall.
“Here we have what should be the most dynamic component of the workforce…are really locked into a narrow regional market in which they can search for more advantageous employment opportunities…It is detrimental for these folks who are trapped in this situation …they are part of – and a disproportional part of – the drag that we seen in the housing sector.”
The overall percentage of homeowners who are underwater is now at 30.9 percent, down from 31.4 percent earlier this summer.