First-time homebuyers in the Philadelphia region will have more trouble finding their dream home thanks to the large portion of affordably priced properties that remain underwater.
In the local market, 36.2 percent of mortgaged houses that fall within the bottom third for home value -- typically what first-time homebuyers seek -- are worth less than what the owner owes on the property, according to a report released Tuesday by real estate data provider Zillow.
“Basically four out of 10 potential sellers in Philadelphia can’t sell their homes,” said Stan Humphries, Zillow chief economist. “It keeps inventory down and that leads to higher than normal price appreciation.”
Philadelphia’s overall negative equity rate, or the proportion of homes valued at less than the amount owed on the mortgage, fell to 20.9 percent in the first quarter of 2014 from 22.7 percent in the same period last year, the report shows.
“The good news is we are slowly working down the overall negative equity rate,” he said. “The bad news is it is still at a very high level.”
The greater Philadelphia real estate market appears stronger than a few other major cities, including Atlanta, which had a first quarter negative equity rate of 33.6 percent, and Las Vegas with 33.9 percent.
The local region’s housing market didn’t skyrocket and then tank as severely as other parts of the country during the crash, Humphries explained.
Even though the recession didn’t hit the Delaware Valley as hard, the current financial conditions show the area’s housing market still has a long way to go, he added.
“The market is going to be swimming with underwater homeowners for years to come,” Humphries said. “We’ll be wrestling with negative equity for the rest of this decade.”