If you are looking to buy a home in Maryland or Virginia, statistics showing the number of underwater mortgages in a particular area could be a little off-putting. There are times when statistics are important, and times when they are not. This is one of those situations where the statistics could perhaps be ignored.
Why so? Underwater mortgages only tell you one thing – homes were once worth a lot more than they are now. Underwater mortgage statistics don’t necessarily relate to foreclosures or short sales. In fact, there are tens of thousands of home owners around the nation who have no idea what their homes true value is today. Their mortgage may well be underwater, however, these home owners are oblivious to that fact until it comes time to sell – then they may get a rather rude shock.
Statistics are just numbers and they are constantly moving. There are areas in both Maryland and Virginia where mortgages were underwater two or three months ago. Today, those home owners have equity – not much, but they do have equity. If you are looking at statistics prior to buying, look instead at days on the market, the number of foreclosures completed, or about to commence. The number of short sales and bank owned sales is also worth consideration. High numbers across those statistics could reduce home values.
At the same time, forward numbers that indicate a reduction in those numbers, for example, few foreclosures expected, could indicate a stabilization of the market in that area. Statistics are a valuable tool, however, when you read scary numbers such as 30% of homes in a particular area are underwater, ignore them – unless of course they mean the homes are literally underwater – if that’s the case, you would hope the home owner has good flood insurance.
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